72A: After Clause 17, insert the following new Clause—“Lending for capital expenditureIn section 122A of the Government of Wales Act 2006 (lending for capital expenditure), in subsections (1) and (3), for “£500 million” substitute “£1,000 million”.”

My Lords, first, I apologise humbly and unreservedly to the whole House for not being here when the business was called.

In moving government Amendments 72A and 143B, I remind the House that I wrote to noble Lords before Christmas to set out the details of the United Kingdom Government’s and Welsh Government’s agreement of a historic new fiscal framework which sets out how the Welsh Government will be funded alongside further tax devolution. This agreement ensures that the Welsh Government have a fair level of relative funding in the long term which is fair to both Wales and the rest of the United Kingdom. This is the view of the United Kingdom Government and it is also the view of the Welsh Government, whose Finance Secretary, Mark Drakeford, has said that he regards this agreement as ensuring,

“fair funding for Wales for the long term by implementing the funding floor recommended by the Holtham Commission”.

This agreement also sets out that the Welsh Government’s overall capital borrowing limit will be increased to £1 billion, thereby doubling the existing limit as set out in the Wales Act 2014. This increase is in line with the commitment made by the Government during the passage of the Wales Act 2014 that we would increase the capital borrowing if the Welsh Government took on income tax powers.

The fiscal framework agreement sets out that Welsh rates of income tax will be devolved in 2019, and so government Amendments 72A and 143B seek to put this agreed increase into statute and provide for its commencement two months after Royal Assent, alongside the provisions in Clause 17 that provide for the removal of an income tax referendum. Alongside the statutory increase to the overall capital borrowing limit, the Welsh Government’s fiscal framework also sets out that the non-statutory annual capital borrowing limit will be increased to £150 million a year from 2019-20, which is equivalent to 15% of the overall cap. This limit aligns with that agreed in Scotland as part of the Scottish Government’s fiscal framework. As is also the case in Scotland, there remain no restrictions on how the Welsh Government can use their borrowing powers to deliver their devolved responsibilities.

The noble Baroness, Lady Morgan, and the noble Lord, Lord Wigley, have, through their Amendments 73 and 144, which were tabled before the two Governments had made this historic announcement, sought to increase the Welsh Government’s capital borrowing limit to £2 billion. I look forward to hearing the arguments that the noble Baroness and the noble Lord have in support of their amendments shortly.

Amendment 143A in the name of the noble Lords, Lord Hain, Lord Kinnock and Lord Murphy, seeks to make the majority of this Bill conditional on the Secretary of State providing an assessment of the impact of the Welsh Government’s fiscal framework and the effect this will have on differential tax receipts in Wales. Ahead of hearing what the noble Lords have to say, I would point out that as part of the Wales Act 2014 there is already a requirement on the Government to provide an annual report to both Houses on the implementation and operation of the finance elements of that Act. The Government have published two such reports already, the most recent just before Christmas, and the fiscal framework agreement restates this commitment to these reporting arrangements. The next report is expected to be published in December of this year, which I expect to be before the reserved-powers model is brought into force.

In the light of the amendments that have been put forward I have ensured that as far as the Wales Office is concerned, we will seek to provide the information that is being sought here. I remind noble Lords that there is a requirement that Government Ministers in Wales also report on this separately. That would be part of that annual report. We have sought to provide an agreement that is fair for Wales and for the rest of the United Kingdom, as I indicated, so I hope that noble Lords are reassured by what I am saying. I will of course await the contributions that are to be made.

I turn briefly to Amendment 74 in the name of the noble Lord, Lord Wigley. In advance of his comments, let me indicate that the Government’s thinking is that it is important to have a standard approach throughout England, Wales, Scotland and Northern Ireland—across the whole of the United Kingdom. As things stand, because contributions from the private sector in Wales are limited to larger employers, they are smaller than those from the rest of the country, so Wales is a net beneficiary of the way this is organised.

I turn briefly to the amendment of the noble Lords, Lord Rowe-Beddoe and Lord Wigley, and the noble Baronesses, Lady Randerson and Lady Finlay, on air passenger duty, which we have also considered in Committee. The Government’s view remains that there can be no separate powers as things stand in relation to the devolved arrangements for Cardiff Airport. Obviously, I await to hear what the noble Lords will say on that issue. In due course I will also formally move government Amendments 72A and 143B. I await contributions from the noble Lords on the other issues. I beg to move.

My Lords, I wish the Minister a happy new year. It is extremely good news that the Welsh Government were able to come to an agreement with the UK Government on the impact of partial income tax devolution to Wales and the other taxes due to be devolved as a result of the Wales Act 2014. We were all aware that there was no chance that this Bill could be passed if there were no agreement.

As financing of the Assembly is central to this Bill, it is worth pausing on the matter for a while, as it is crucial to the deliverability and provision of services in Wales. I turn first to the effective change in the method of financing Wales as a result of partial income tax devolution. It has long been argued that due to its relative degree of poverty, Wales has been short-changed over a relatively long period, in particular when compared to Scotland, on the basis of the Barnett formula. In this new deal Wales will have access to around £2.5 billion in new tax revenues from the people of Wales. The Treasury will of course be anxious to cut the Welsh block grant to an equivalent amount.

If income tax receipts were to stay constant in both Wales and the UK over the long term, this would not be a problem. However, the fact is that in future years this block grant adjustment will go up or down depending on what happens to revenues in the rest of the UK. Unless Welsh taxes are to grow as quickly as England’s, we could be in trouble in future years. I am afraid that the chances of this happening are quite remote, not because Wales is incapable of raising its game but because it starts off with much lower incomes and does not have the tools to change the situation if the UK Government implement certain policy decisions which may make sense in England but do not make sense in Wales. Fiscal responsibility on the whole remains at the UK level.

To take as an example the UK Government’s policy of increasing the level at which taxpayers start to pay income tax—the personal allowance—this is great news for people on low incomes. But, because proportionately more Welsh taxpayers than English taxpayers are taken out of paying tax altogether, less tax will be collected in Wales to pay for our schools and hospitals, and Wales will have no control whatever over this decision. To be fair to the Treasury, and to its credit, it has recognised this and has agreed to make separate block grant adjustments for each of the three bands of income—so that was a good win for Wales.

I will heap even more praise on the Treasury—which I assure noble Lords does not occur often. It has been agreed that the Barnett floor will be made permanent, which means that Wales should not lose out under this deal either now or in the future. In the past, the system has worked because, ironically, the more public funding is spent in England, Wales becomes worse off in terms of expenditure relative to England. This led Gerry Holtham to claim in his report that Wales was being short-changed to the tune of around £300 million a year.

However, the fact is that in recent years we have had an extended period of austerity. Wales has also had relatively slower population growth, which means that for every £100 per head spent in England, the Welsh Government now receive approximately £120 per head—higher than Holtham’s suggestion that Wales needs around £115 per head to respond to the needs of the Welsh people. Of course, we are not dancing in the streets in Wales, because this really reflects a reduction in the role of the state—a principle to which we are opposed, not just in Wales but across the UK. We will start believing Theresa May’s rhetoric on the shared society when she stops shrinking the state and starts expanding it. That is worth noting. We are also aware that this situation is likely to change at some point in the future, and we need to focus on this issue.

In accepting that the Barnett floor will be made permanent, Wales will always be assured of 115% funding for its devolved public services. This is extremely welcome news, and I hope that it will go some way towards alleviating the concerns that my noble friend Lord Hain and others expressed in Committee. The slight concern I had in relation to the impact of population change, over which of course the Welsh Government have little say, has been addressed by the Barnett bonus that has been agreed to, which is a 105% multiplier to any Barnett consequentials from 2018.

On the amendments which relate to borrowing powers—my Amendment 73 and government Amendment 73A—we made it clear at Second Reading and in Committee that one of the key requirements, if there should be a partial income tax devolution to Wales, was that there should also be an increase in the amount the Welsh Government are allowed to borrow. We, along with the Welsh Government, are intensely aware of the restrictions that austerity, along with the potential serious loss of European funding, will put on our ability to invest in infrastructure in particular. We are aware that, despite having the lowest unemployment rates in the whole of the UK for the first time ever, low productivity rates are a real curse on the Welsh economy, and that infrastructure investment would go a long way towards improving the situation and increasing the GVA of Wales.

In our amendment we request that the amount allowed to be borrowed should be £2 billion. This is based on the Holtham recommendations, which take into account the fact that Wales has borrowed very little under the PFI initiative compared with other parts of the UK. The amount offered by the Treasury is £1 billion. This is £500 million more than the current amount but £1 billion less than we had hoped.

I have spoken to the Finance Minister in the Assembly and he suggested that, in the current circumstances, as we have to use revenue from the Welsh budget to support any capital borrowing, the amount we can borrow is limited because we would have to divert money from the regular running costs of the NHS, education et cetera to support that borrowing. This underlines how flawed and self-defeating the policy of austerity being pursued by this Government is.

My other concern with the agreement is what happens if Wales needs a reassessment in terms of its higher spending needs. What is good in 2017 may not look so good in 2030, particularly in the light of Brexit. Can the Minister confirm that the framework allows for a review of all its arrangements at least once in any parliamentary term, and that it could include an adjustment to the level of the Barnett floor if necessary?

I am also concerned about the Treasury being judge and jury in terms of financing the Welsh Government. Can the Minister give us some kind of assurance on this matter—for example, that some independent advice could be secured by the Welsh Government that will be respected? On this issue, there is an amendment that requires an impact assessment to be carried out and laid before both Houses of Parliament before this section comes into effect. As there has been so little time for us to scrutinise the details of the agreement, I urge the Minister to agree to this, as we should always ensure that impact assessments are made prior to any change in policy.

I turn briefly to the amendment that will be proposed by the noble Lord, Lord Wigley. I am of the view that the Government have made an absolute dog’s breakfast of the apprenticeship levy and have made no effort whatever to consult with the Welsh Government prior to the announcement. Since apprenticeships fall very clearly into the remit of the Welsh Assembly Government, that is an absolutely travesty. I bow to the superior knowledge of my noble friend Lord Rowlands, who demolished the Government’s approach to this in Committee.

I am not sure that I agree with the entire amendment of the noble Lord, Lord Wigley, as I do not believe that it is appropriate to ask any person in Wales to be charged the levy if they have a pay bill. However, I urge the Government to rethink their whole approach to the levy in Wales and to make a commitment to work with the Welsh Government to implement a more practical solution. If this is not possible, I suggest that this is an area that would need to be devolved to Wales in future.

Finally, I would like to address the issue of the devolution of air passenger duty for long-haul flights. We know that this was a recommendation made by the Silk commission. The devolution of air passenger duty for long-haul flights would not only benefit Wales but enable more efficient use of the UK’s existing airport capacity. Devolving the fiscal responsibility to Wales for long-haul flights could help to drive economic activity to Wales—although it is worth underlining that it would need to clear EU state aid rules.

I do not buy the argument that this would impact adversely on Bristol Airport. Currently there are no long-haul flights from Bristol. Bigger planes, such as Boeing 747s, are not able to use the runway. The last direct flights across the Atlantic from Bristol to New York were scrapped six years ago. So a reduction in air passenger duty would help air passengers, support growth and jobs, and cut costs for business. I ask the Minister to consider these points when he makes his response.

My Lords, I am glad to follow the noble Baroness in addressing these questions. First, let me say how glad I was to see the Minister arriving in the Chamber. I was fearful that we might be losing all the last few months’ work if we stumbled at this last stage.

Before I address the amendment in my name, I would like to comment that everyone must be glad that progress is being made on the fiscal framework and that there has been some agreement, but only time will tell whether that agreement is adequate. One problem is that, over the past 17 or 18 years since the establishment of the National Assembly, there has been a shortfall of more than £5 billion due to the effect of the Barnett formula on the Assembly’s funding, and therefore we are starting from a position where we will have to work very hard indeed to make up that loss. Clearly, the formula now forthcoming may or may not work in the future, but it does nothing to recoup that loss. Also, a central question in relation to the capital programme, which I will talk about in a moment, is the availability of a revenue stream to fund the interest on capital borrowing, and I suspect that that has not been adequately dealt with within the framework.

Amendment 73, which was spoken to by the noble Baroness, Lady Morgan of Ely, seeks to raise the Welsh Government’s capital expenditure limits to £2 billion, in line with other devolved settlements. The arguments on this issue are well rehearsed. We know that, as in many other areas, the UK Government have failed to honour the wording of the Silk commission and have given Wales a settlement that is less than adequate when compared with those of the other devolved nations. Therefore, perhaps I may once again outline precisely what we seek in these amendments.

The independent Silk commission, on which the Minister sat, agreed that the Welsh Government should have borrowing powers comparable to those of their Scottish counterparts. As outlined by the noble Baroness, Lady Morgan, taking into account considerations relating to PFI, this would take us to around £2 billion. As noble Lords will know, the recently agreed fiscal framework, which sits alongside the Bill, is seen by some as making progress on this issue, but under the framework £1 billion will be the Welsh Government’s capital expenditure upper limit. The lead amendment in this group—government Amendment 72A—incorporates this figure into the Bill. However, it is difficult to see how that represents anything like adequate progress. The Welsh Government will be short-changed by £1 billion compared with what they should have, and Plaid Cymru Members, both in another place and in the Assembly—regard this as totally unacceptable.

Although the parsimony of the UK Government on this matter is staggering, I am afraid that some of the blame must be laid at the door of the Government of Wales. If the noble Baroness, Lady Morgan of Ely, who spoke to the amendment, really believes in what it says—that the limit should be £2 billion—why did her Labour colleagues in the Assembly settle on the figure in the fiscal framework? Surely we should be fighting for £2 billion from the Assembly end as well.

That said, I shall conclude my remarks on this amendment by highlighting some rather remarkable comments made by the Minister on Report. He urged us not to push an identical amendment to a vote on the basis that,

“we do not want to constrain the figure in case the discussions lead to it going higher than that”.—[Official Report, 7/11/16; col. 927.]

Was the Minister deliberately leading us down the garden path, or had he himself been led down that path by Treasury officials promising to write cheques which they knew they would never cash? Perhaps he knew that a higher figure was never going to be delivered as part of the fiscal framework—a carrot that in his heart he knew could not be delivered. If that was the case, it was somewhat reprehensible, although I might say out of character. If he himself had been misled into believing that the money was there, he has surely been put into a totally impossible position. Some explanation is needed and some Treasury heads should roll. However, if he was indeed right that such money was available but the Welsh Government made an inadequate case to secure it, then Wales needs to know. Whichever it was, it seems that Wales will not get the resources it needs to stimulate investment-led economic growth and, compared with Scotland, it is getting second-class treatment.

I now turn to Amendment 74, which stands in my name and concerns the apprenticeship levy. The amendment relates to the devolution of the funds generated through the apprenticeship levy and the way in which it will be implemented. It seeks complete transparency surrounding the levy and how it is rolled out in Wales by making separate provision for the levy in Wales in consultation with the Assembly. We debated this issue in Committee and, although I got the impression that the Minister recognised that there were some problems, particularly in cross-border circumstances, he does not appear to have brought forward any proposals to tackle the issue. The amendment seeks greater clarity regarding the implementation of the levy in Wales and how the Government intend to work with the Assembly to ensure that this tax, which straddles not only national boundaries, but also both devolved and non-devolved areas of policy, works in practice. Greater clarity is essential so that the levy works effectively in both countries to provide high-quality, effective apprenticeships.

I am grateful to the noble Lord, Lord Bourne, for his letter, which he sent to all noble Lords on 14 November, attempting to shed some light on the Treasury’s intentions. This confirmed that the agreement would,

“provide the devolved Administrations with a population share of the Office for Budget Responsibility’s latest apprenticeship levy forecast”, meaning that the Welsh Government will receive £128 million in 2017-18, £133 million in 2018-19 and £138 million in 2019-20.

“Beyond 2019-20, once the levy is embedded, the normal operation of the Barnett Formula should provide a similar outcome”.

It went on to say that the Welsh Government would then,

“decide how to allocate this funding to their devolved responsibilities”.

I thank the noble Lord for this note confirming the Treasury’s intentions, although this has left it rather late for the Assembly to consult widely and to formulate an apprenticeship policy in tandem with the commencement of the charges being imposed on organisations when it comes into force in April.

However, in the previous debate, the noble Lord, Lord Bourne, when questioned regarding the Barnettisation of the levy to Wales, conceded that he was,

“not sure that Barnett would present the right answer”.—[Official Report, 7/11/16; col. 904.]

If the intention of the levy is for companies to be able to “get out” what they “put in”, then this should have been communicated from the start. Now we are left in a position where organisations in Wales are waiting for the Welsh Government to play catch-up and announce how they intend to allocate their revenue in a race against time before April. Due to this lack of communication, several organisations in Wales which will be eligible to pay the levy are still in doubt as to whether or how they will benefit from the levy. There is a danger that some organisations may wish to relocate their training operations over the border to England, where they may have greater certainty and where they will be more certain of securing direct benefit from the levy that they pay.

I acknowledge that some of the blame lies at the other end of the M4, with Ministers in the Welsh Government dragging their feet as to how they intend to use the funds. In a letter to the Assembly’s chair of the Economy, Infrastructure and Skills Committee in November 2016, the Welsh Retail Consortium expressed concern that,

“Levy-payers in Wales will not have any opportunity to see a direct return from their contribution to the Apprenticeship Levy”.

The consortium contrasts the situation in Wales with that in Scotland, where the Scottish Government have consulted extensively with stakeholders, whereas the Welsh Government have given very few assurances. It is clear that the UK Government are introducing legislation that has been England-centric in its planning and implementation and as the noble Lord, Lord Rowlands, eloquently put it during the last debate,

“This levy has added confusion and uncertainty, and sadly is a terrible example of a non-consultation with devolved Administrations on issues that are fundamental to such Administrations”.—[Official Report, 7/11/16; col. 903.]

I hope that our experience with this levy will serve as a salutary lesson about the need to formulate clear and distinct devolution, where it is transparently clear as to where responsibility lies and not to be fudged, as in this instance. This half-devolved, half-reserved policy is an example of how the UK Government should not conduct their business in future.

Finally, I turn briefly to Amendment 80 on air passenger duty. I support Amendment 80, which is tabled in my name and the names of the noble Baroness, Lady Randerson—I am not sure whether she will be moving it—the noble Lord, Lord Rowe-Beddoe, who as I understand is indisposed and unable to take part in this debate which is so close to his heart, and the noble Baroness, Lady Finlay, who I am glad is here with me to support it. On the third day in Committee, we had a vigorous debate on this issue, in which an amendment previously tabled by my party colleagues in the other place was moved by the noble Lord, Lord Rowe-Beddoe. I am glad to see that he has put his name to this slightly narrower amendment. I say narrower because, whereas the previously tabled amendment on APD sought to devolve the whole tax, this amendment, as the noble Baroness, Lady Morgan, stated, would devolve powers over air passenger duty only for long-haul flights. Although I would like to see power over the whole tax devolved, as is the case in Scotland, I can appreciate that this narrower form of devolution for APD was the recommendation of the Silk commission.

I will not restate what has already been said so expertly in previous debates on this matter, but I would like to take the opportunity to respond to some of the Minister’s comments in Committee. As I am sure the Minister will be aware, it comes as a surprise to many that the Wales Office also seemingly has jurisdiction over Bristol. I fail to see how the Minister is putting the Welsh economy first when he asserts that the devolution of APD should not go ahead as it may damage the commercial interests of Bristol Airport.

The other repeated protestation of the Minister was that this would simply benefit south Wales and do little for the north of the country. I am sure the Minister himself knows that this is a bit of a red herring. The economic benefits of a competitive international airport would benefit the economy of the whole country. Inevitably, policies have greater and lesser effects in different regions. Would he refuse to invest in the M4 because it is irrelevant to the north or to upgrade the A55 because it does not help the valleys? Let us apply the Minister’s logic to a directly comparable circumstance—that of expanding Heathrow, or Gatwick for that matter. Clearly, such projects directly benefit the south-east of England much more than any other region. But I expect that the Minister, like most of his party colleagues, will be making the case for airport expansion in the south-east on the grounds of its wider benefits to the whole economy.

At a time when Wales must show that it is open to the world, when international links are arguably more important than in any period in recent history and when the speed of globalisation has created a necessity for goods and people to travel by air, in these circumstances the need to ensure that Wales has all of the levers necessary for creating an effective international airport is patently obvious. I therefore ask the Minister to heed the calls of Members across parties, both here and in another place, and support this amendment.

My Lords, I will address Amendment 143A standing in my name and that of my noble friends Lord Kinnock and Lord Murphy of Torfaen. The amendment expresses concern about, and seeks an impact assessment on, the problem of differential tax receipts. Over the past few years, as the Minister will know, tax receipts in the UK have increased at a rate three times that of those in Wales. A gulf is opening up and Wales needs to be protected.

After the concerns on these and other matters that I and fellow Labour Peers have repeatedly expressed about the dangers to Wales of being short-changed by the devolution of income tax, I nevertheless congratulate the Secretary of State and the First Minister of Wales on reaching agreement on a new fiscal framework. It seems that they may have found a pragmatic path forward, one which both rejects the status quo and assures Wales of fairer funding for the future—though perhaps not quite as far over the horizon as the noble Lord, Lord Bourne, claimed when he announced the agreement. The new framework prolongs the life of the 115% funding floor for Wales, guaranteed in 2015 for the current Parliament. It accepts the assessment of Welsh needs relative to England made by the Holtham commission, while deftly sidestepping Holtham’s recommendation to adopt an entirely new formula for linking funding to relative needs across all parts of the UK. Instead, it embraces our old friend the Barnett formula, and thereby delivers the latest instalment in a long success story. By injecting a new needs-based factor into the Barnett formula and setting a welcome floor under the Welsh budget, the new fiscal framework goes a long way to protecting Welsh needs. I welcome that and I welcome the Minister’s role in it.

The Holtham Commission on Funding and Finance for Wales found the unvarnished Barnett formula distinctly unfit as a means for matching the funding allocated to Wales with Welsh relative needs. It judged it to be unsustainable over the medium term, but it also acknowledged that Barnett, with its modifications, gets the job done, as it is done again in this new fiscal framework. In his covering letter announcing the agreed fiscal framework on 19 December 2016—and we were grateful for notification of that—the noble Lord, Lord Bourne, claimed that the agreement,

“provides Wales with a fair level of devolved funding for the long term”.

Only time will tell whether that ambitious claim proves true. If by “the long term” the Minister means the 40-plus years that the Barnett formula in its various manifestations will have lasted by the time this new fiscal framework comes up for its first review, that will mean that the annual block grant to Wales in the 2020s will be derived from what it was at the end of the 1970s. I wonder how many Members of this House feel comfortable at such a prospect—basing budgets on spending patterns set 40 years ago, albeit with some adjustments along the way.

Let us hope that the Barnett formula, with this new 115% Welsh floor, does not set in stone the definition of Welsh needs regardless of how things change in the years that lie ahead. For example, we welcome the many new residents settling in Wales from parts of England, but they tend to be of a certain age and will create increased burdens for Welsh social care and the health service in the future. Let us hope that the Barnett formula, therefore, does not set this situation in stone.

For all its positive features, the new framework has its limitations. I will mention four. First, I acknowledge that it does respond to the call that I made seven weeks ago, when this House last debated these issues, for clarification about how any funding floor would interact with income tax devolution and block grant adjustments. While it lasts, the 115% funding floor limits the damage that the differential growth in tax receipts that we have seen between Wales and England can do to the Welsh budget. That is a bit like having third-party fire and theft insurance; it is valuable but falls short of comprehensive cover and is subject to change on renewal in the 2020s. The claim in paragraph 32 that the framework applies the same population figures to both tax and spending in calculating changes to the Welsh block grant does not persuade me that the ongoing threat from differential tax growth after the transitional period has been met.

I was also troubled and not a little bemused by the Written Answer given on 5 January by the noble Baroness, Lady Neville-Rolfe, to my Question:

“To ask Her Majesty’s Government what assessment they have made of the extent to which the agreement on the government of Wales’ Fiscal Framework published on 19 December compensates for the lower percentage increase in income tax receipts in Wales compared to the UK since 2010–11”.

I remind the House that the UK has seen a 6% rise in tax receipts since 2011. Wales has seen a 2% rise, which is a significant difference. The noble Baroness’s Answer was opaque, to say the least:

“As set out in the Welsh Government’s fiscal framework, the UK and Welsh governments have agreed to apply a block grant adjustment for each band of income tax separately. Doing so will fully account for the different proportions of basic, higher and additional rate income tax payers in Wales and the rest of the UK. This means that the Welsh Government will hold an appropriate set of risks and opportunities regarding their new income tax powers, as part of a wider funding agreement that the UK and Welsh governments agree is fair for Wales and fair for the rest of the UK”.

To be frank, that is Treasury-speak for not answering the Question. Does that mean that the lower percentage increase in income tax receipts in Wales compared with the UK will be specifically compensated for or not? Perhaps the Minister can enlighten us on this crucial matter, which could otherwise see Wales short-changed in this Bill.

Secondly, the framework does not deliver on the grand claims that have been made about tax devolution increasing financial empowerment and enhancing accountability, which is supposed to be what it is all about—increasing accountability. The initial baseline adjustment to the block grant in 2019-20 will be set at the receipts that would have been generated by Welsh rates at 10%, whatever rates the Welsh Government actually choose to set. That is what Annex B of the agreement states. If the Welsh Government choose in that year or subsequent years to raise income tax rates by more than 10% and to spend the extra revenue, the effect would be to boost Welsh GDP via the standard Keynesian balanced budget multiplier. But it would distort rather than enhance political accountability, just as central government manipulated council tax for years to deter local authorities from raising council tax to fund extra spending on local priorities.

Thirdly, the new framework shows no sign of having given any consideration to indexing block grant adjustments in Wales to changes in comparable regions in England rather than to England as a whole. Holtham found that the two English regions Wales came closest to in 2010 were the north of England and, perhaps surprisingly, London. Wales’s needs were around 15% above the England average while the south-east of England excluding London had needs that were nearly 15% below the England average. Comparing Wales to England as a whole, including its better-off regions rather than to the closest equivalent English regions, does a disservice to Wales.

Fourthly, the only provision the new fiscal framework makes for updating estimates of relative needs at some future point is to say that things will be looked at again by both the UK and Welsh Governments when Welsh funding begins to reach 115% of equivalent spending in England, expected to be at some point in the 2020s. This will be towards the end of a transition period during which Welsh funding will be deliberately driven down towards 115% from its current 120% level. By the way, it has reached 120% only because Westminster-driven cuts in public spending have converged in line with the Barnett formula imperatives after years of Labour Government public spending rises, and should a future UK Government increase spending, that convergence would resume; hence the need, I believe, for an impact assessment. The Minister helpfully mentioned in his opening remarks that this could be provided in the annual report to which he referred. If he can reassure us on that point, that would give me some encouragement in terms of whether to press this amendment or not.

My Lords, I want to speak briefly to Amendment 80 in the group to which I have added my name. There are two specific categories, the first being the structure of Cardiff Airport itself for taking long-haul flights and secondly its relationship to other airports and the benefits for the region of south Wales.

The Cardiff Airport runway is particularly long so it is often used as a diversion runway for flights that cannot land at other airports for a variety of reasons. For many years it has received the largest aircraft when they need to come in for servicing. Another advantage is that Cardiff does not have a major crosswind problem because the airflow around the Sully cliffs is not severe enough to cause any difficulties when landing large aircraft. The airport is therefore particularly suited to long-haul aircraft. This narrow amendment poses a question that is different, in that it would allow Wales to determine its future in this area.

The other aspect is Cardiff Airport’s relationship with other airports in the region. It is extremely convenient for people in west and south Wales who face problems in conducting commercial relationships in other parts of the world, so the development of the airport would certainly be invigorating. It would also help areas around Bristol and Hereford. Moreover, the skies over London are very crowded. Anyone who has been on an aircraft going round in circles as it stacks to land, and seeing other aircraft both above and below, knows that that can feel scary. One is aware of just how crowded the skies can be. Aircraft coming in to land at Cardiff Airport do not pass over populated areas because the approach is over the Bristol Channel, thus there are no problems with noise affecting residential areas. Because of Cardiff Airport’s position, passengers can travel away easily along roads that are not prone to congestion or major traffic jams. People can move on to other destinations or approach the airport with relative ease.

I hope that the Minister will think again and I wonder if we could come back to this issue at Third Reading, even if the amendment has to be made narrower still, so that we do not miss a really important opportunity to do what is right for the region and right for air travel, and would meet what was a core recommendation of the Silk commission.

My Lords, I apologise for the absence of the noble Baroness, Lady Randerson, who is heavily engaged in the Moses Room on the High Speed Rail Bill. I therefore stand in her place.

My experience with Cardiff Airport is somewhat limited. I have flown into it only once, in an eight or twelve-seat plane from Harden, in north Wales. In those days there was no gap between the passengers and the pilot. As we came over the hills and the valleys and headed into Cardiff Airport, the co-pilot said to the pilot, “Do you think we will make it?” This did not fill his passengers with a great deal of confidence.

I support, as I always have, the concept of devolving air passenger duty in order to improve the use of Cardiff Airport and to provide a facility for the people of south and mid-Wales. I did a little research this morning on Bristol because Bristol seems to be the problem and discovered that it has only one flight that goes any distance: a weekly flight to Cancun, in Mexico, which is not one of the major long-haul trips. As the noble Baroness, Lady Finlay, pointed out a moment ago, the major airports in the south of England are overflowing. We are looking for solutions to the planes that are stacked and the passengers who fill the terminals in Heathrow and Gatwick. Here we have the possibility of a facility which will take long-haul traffic. If a proper incentive were given by a reduction in air passenger duty, then I am quite sure that the people of south Wales and indeed of the borders would flock to Cardiff Airport. It is common sense that this possibility should be allowed to develop. Bristol Airport, on the other hand, does not have any longer flights and does not have the capacity for such regular long-haul flights.

We have always supported air passenger duty devolution and I hope that the Minister, even at this stage, will give further thought to it. I do not think we have heard a positive rationale for not devolving it, save its impact on Bristol Airport. Its impact would be nil.

We very much welcome Amendment 22A. The increase in borrowing powers is one of the key points in the agreed fiscal framework. I congratulate the Government and the Welsh Government for coming to a sensible agreement on this before the Bill reaches its conclusion. It seems a reasonable basis for Wales to be ambitious in its capital projects. As for Amendment 73, it is ambitious—perhaps a little bit too ambitious, because, although you can pluck a figure from the air, debts do have to be repaid, and interest on them is a heavy burden and a drag on current expenditure. Therefore, a balance has to be struck. We believe that, for the moment, the Government and the Welsh Government have struck the right balance.

My Lords, I had not intended to intervene but I am prompted to do so by one or two things that have said. I particularly want to have a word about the much tighter amendment on Cardiff Airport, which shifts my position.

First, I congratulate the Government on the way they have dealt with the fiscal framework. Acknowledgment has been given from around the House to the real progress that was made in reaching what inevitably is a compromise deal but one which represents a very considerable step forward. Yes, things do change with time. When I was Secretary of State of State, long ago, it just happened that the Barnett formula was rather favourable to Wales, so I avoided criticising it. But of course it has changed—and we have heard how things change over time—and the Government, and the Welsh Government as well, deserve some credit for the deal that has been done.

I turn to this more restricted amendment about Cardiff Airport. I suppose that I should declare two matters. Long ago, at Second Reading, I supported the Government and declared an interest as a frequent flyer from Bristol. I did not declare another, even more remote interest—that long ago I was part of a consortium that bid for the management of Cardiff Airport. We did not bid enough, but I like to think that, if we had won, we would never have allowed that airport to be pushed downhill as rapidly as its subsequent managers did. That is the past history, which is very regrettable. I am sad that my noble friend—I always regard him as my noble friend, because he is a very good friend of mine—Lord Rowe-Beddoe, is not here, because he did great work in trying to rebuild the airport from the state in which it has been.

The new amendment would change things. Long haul is a very different matter, and the airport is not in my view a competitor with Bristol, as I feared that it would be in the past. So I hope that the Government will be sympathetic to this much narrower amendment. I withdraw the hostility that I previously expressed for the wider amendment and the wider campaign that was originally fought.

I shall speak to Amendment 74, proposed by the noble Lord, Lord Wigley, to continue to clarify the issue of the apprenticeship levy. I express my gratitude to the Minister for his letter on this issue in November, which was extremely informative and helpful. It spelt out how the Treasury was going to Barnettise the levy, which was very helpful, but I would like to press him a little more on the mechanics of this arrangement. I put this in the form of a question, because it has been hard to get anything factual. Under the Barnett formula before the levy, am I right in thinking that it was the budget of the Department for Business that was responsible for expenditure on apprenticeships? Are we now going to see an exchange—a replacement of BIS with Revenue and Customs—which is not an addition but just a transfer of responsibility for organising the Barnett formula in relation to apprenticeships? Am I right in thinking that that is the mechanics of this case?

Of course, the apprenticeship levy came out of the blue and without consultation—a point that we made very forcefully in an earlier debate—when the Assembly had already devised a very positive and constructive apprenticeship policy, envisaging no fewer than 100,000 places over the Assembly period and a budget of some £110 million. Now I understand that—and I am grateful if this is the case—as a result of the announcements and the fact that the Assembly knows that some of the apprenticeship levy money is going to be Barnettised, it has increased the present budget from £110 million to £125 million. That is a significant and important additional contribution to the Welsh economy. So on that side, I can welcome what has happened. But alongside that, we still do not know what the cost of the levy will be to the companies, public bodies and major utilities operating in Wales and how much of it they will be able to recover, one way or another. Yet again, I put the point in the form of a question because I have heard of some of these figures only at second hand. I hope the Minister, when he comes to reply, will be able to give us a much more authoritative account.

As I understand it, one assessment has been that the apprentice levy is going to cost the public sector in Wales some £30 million. In fact many organisations, public utilities, public bodies and companies, frankly, are treating the levy as an employment tax. They cannot see how they can retrieve the sorts of sums they are going to be levied with in any form of apprenticeship scheme that is going to be available. For example, what is the cost of this levy going to be to our 22 local authorities? Am I right in thinking that a county such as Pembrokeshire is going to pay some £750,000 a year as a result of the levy, and Powys about £600,000 a year? Multiply that by the 22 local authorities and you wonder how those authorities can possibly reclaim, through the levy, anything like the amounts of money they will pay. Can the Minister clarify and identify for us what the cost will be to a whole range of public bodies, utilities—I am going to refer to utilities in a minute—local authorities, the National Health Service and the Welsh Government themselves, which are all going to pay this levy? I fail to see how, somehow or other, we are going to be a beneficiary of this arrangement.

I raise one other major anomaly. We have very large national utilities that stretch across Scotland, Wales and England.

According to one figure I have seen, some 75% of the employees of these major utilities—the energy companies, et cetera—are in the devolved Administrations. That means they can claim only 25% of the apprenticeship levy that they are going to pay through the English voucher system. Again, I would like to know how this is going to be sorted out. The situation is muddled and lacks the transparency the noble Lord, Lord Wigley, spoke about. We are flushing out greater transparency but it is still not sufficient, and I hope that we can use the opportunity of debating this amendment to seek much greater clarification.

My Lords, I shall follow on from my noble friend Lord Rowlands on the issue of the apprenticeship levy and very briefly and simply make the case for reconsideration of the policy being implemented now by the Government in both the public and private sectors.

I believe that within the formulas currently being employed—and this applies very particularly to Wales because of our substantial local government and public sector, for various historic and structural reasons—there should be better treatment for both private and public employers who are already proven good trainers. There is insufficient discrimination in the way the system is intended to operate now to give higher rebates or greater inducements to improve apprenticeship training, numerically and in qualitative terms, because those who are already good trainers, who have the custom and habit of making substantial provision for the training of new generations of skilled personnel, are simply not getting rewarded as they should for good performance, and their strong intention to continue with that good performance, by comparison with employers who are and will be levy payers who have a much weaker record of the employment and development of apprenticeship skills. I make that plea in the context of this Bill because it has direct relevance.

There was a time, a very long time ago, in the early 1990s, when I had various obligations in my mid-life crisis of being leader of the Labour Party. We developed an apprenticeship levy scheme that was deliberately constructed in order to reward public and private sector companies and institutions with good records of apprenticeship performance and to finance their bonus, as it were, out of the levy on those with weaker performances. So there was a dual spur of inducement to improve apprenticeship performance in rewarding those who had good records—and intended to improve upon them—and in the minor penalty, but nevertheless a penalty, on those who had no such record of good performance. There was an inducement for them to reduce their levy obligations by improving their performance.

I am certain that if that principle were to be installed as part of the improved but in some respects questionable new system of apprenticeship levies, there would be greater rewards. It would have a particular application for some of the employers mentioned by my noble friend, for example, because these local authorities are very substantial employers in the areas that they serve. The obligations resulting from the levy will not be offset by the rewards that they can derive from it, and therefore by a great perversity the people of those areas and the authorities themselves will be disadvantaged by having established good apprenticeship training performance. Surely that cannot be the purpose underlying this change and in their own interests, as well as those of employers who provide a good model, I hope that the Government will give it some reconsideration.

Arising from other points made thus far in the debate, I again refer briefly to the possibility of changing arrangements and devolving powers relating to air passenger duty to the Cardiff Government. I make this argument to provide devolution in order to exercise absolution. The whole purpose of devolving responsibility for air passenger duty on long-haul flights from Cardiff Airport would surely be to give the devolved Government in Cardiff the right not to make the levy. There are lots of reasons for supporting such an argument, including that of the disproportionate cost inflicted on long-haul passengers on very modest or low incomes, who for a variety of social and family reasons need to travel on long-distance flights. But that is not the argument I offer this afternoon; I would provide Cardiff Airport with an advantage that could add attracting long-haul trade to its very substantial existing advantage of really speedy transfer times.

To a certain extent, I refer to the fortunate experience of the publicly owned Manchester Airport—a very successful airport which continually secures profitable operation and very high standards of efficiency. What the enterprising local authorities that own Manchester Airport did, a couple of decades ago now, was to undertake an initiative seeking deliberately to attract long-haul flights. They hoped that by so doing they would attract a degree of short-haul flights from other European destinations. And so it came to pass—so much so that it now has a substantial trade in long-haul which attracts inward and outward flights from and to other European destinations.

I do not suggest for one second that Cardiff would, over a short period, be able to achieve a rapid transition to Manchester’s throughput of passengers, which is now huge. The expansion there over the last 25 years has been remarkable and entirely commendable. But if Cardiff could distinguish itself by offering a holiday on air passenger duty and seeking to attract long-haul flights, it could have a special convenience and passenger attractiveness for a great arc of the population of the UK, running from Bristol right through Gloucester to Oxford and up to Birmingham, where it would obviously be in competition with long-haul flights from Birmingham’s excellent international airport.

Nevertheless, by offering that additional inducement, it would be attracting the attention of global passengers to the fact that Cardiff is a very convenient destination for a large segment of the UK population. And it would have the added inducement of offering cheaper travel costs as a result of not having to make the passenger levy. I just hope that the Government will think in enterprising terms of trying to facilitate the competitive operation of long-haul flights both as a way of relieving pressures on hub airports in the London area—which is an advantage in itself—and as a way of stimulating the potential for a different level of aviation business out of Cardiff Airport.

My other point echoes—as one would expect, as my name is on my noble friend Lord Hain’s amendment—the central point that my noble friend made with great effectiveness. It is that such is the disparity of growth in tax revenues between the all-England average and the Wales average that there is a very direct need in terms of economic justice as well as the facilitation of good government and properly financed activities for compensating for the difference in the rate of increase of tax revenues, where blame to no one is an established fact of life.

Just as I would make the argument that we work continually for the day when Wales has no right to claim European regional funding—that is the ambition that we have had throughout the whole time that we plotted and planned and campaigned to secure Objective 1 status for Wales—I would also make the argument for direct guaranteed annual compensation for the different rate in growth in tax revenues, which is structural and not the fault of anyone, and for it to be an advantage for Wales, or at least the provision of economic enablement to Wales, that we would seek to work to end, simply because Wales had become so fortunate and so rich and so effective in its tax gathering that it was experiencing prolonged periods of economic growth, and therefore revenue growth, and so at some time in the future would not need such compensation.

In the meantime, however, because of the structural disequilibrium between Welsh tax growth and all-England tax growth, the very least that we should be seeking is fair comparisons between areas in England of similar industrial and economic structure and history to those in Wales, or, even more directly—and much more simply—we should make the comparison between Welsh rates of income tax growth and the English rate. Unless this basic equilibrium is addressed structurally and constitutionally, the disparities will continue to grow and, with them, the great disadvantages and some of the economic disincentives. So I ask the Minister, who I know is deeply committed to the basic well-being and future development of Wales, to give the most positive consideration to the proposal made by my noble friend.

My Lords, as a co-signatory to my noble friend Lord Hain’s amendment, I support everything that my noble friend Lord Kinnock just said about the need to review the operation of devolving some income tax to Wales.

I congratulate the Minister and the Welsh Government on producing the fiscal framework. I defy anyone to understand it on their first or indeed second reading of it, but by the time you get to the third you get the general impression that it is an improvement in the finances for Wales over the last number of years. An improvement indeed: I have been living with the Barnett formula for three decades, and there is no question in my mind that the fiscal framework now before us is an improvement. However, there is no point in improving on the block grant if you then start losing out because of the income tax side of it, and that is the point that my noble friends have put. The important issue, as I am sure the Minister would agree, is that in the annual review of financing for Wales the impact assessment of this change will be very seriously examined. I am convinced that the comparisons between Wales and the whole of England mean that Wales could be disadvantaged unless we redress that in some way.

I support noble Lords who have dealt with the issue of Cardiff Airport. My noble friend Lord Kinnock, a former European Commissioner for Transport, put it distinctly: if we could give some advantage to Cardiff with regard to long-haul flights, that would not just be a benefit for Wales; it would benefit a whole swathe of England as well. I cannot for the life of me understand why the Bristol versus Cardiff argument applies in this case. Bristol has no runway capable of taking these long-haul flights. Cardiff has, and it is a very good runway. That could help the rest of the country as well as Wales, and I think the Minister must be persuaded that right across the House today people have said that this is a reasonable amendment that would not affect the Government’s position with regard to air passenger duty generally. I think the Government are wrong on that, by the way; if you devolve it to Northern Ireland and Scotland, you should devolve it to Wales too. Still, if Bristol is blocking this proposal, in the case of long hauls there is no block that the Government can actually agree to.

I hope the Minister will look favourably on all the different points that have been made today because they are made with the knowledge that over the last weeks and months the Government have accepted different points that have been put by Members of the House across the political spectrum. The Government have conceded on many issues, and I see no reason why they could not concede on this small but important point.

My Lords, I thank noble Lords who have participated in the debate on the amendments in this group. Much of their contribution has been persuasive and helpful.

I thank those who have acknowledged the progress made in relation to the fiscal framework and the agreement. I stress that the agreement has been made between the UK Government, by the Treasury, and the Welsh Assembly Government, via the Finance Minister and the Welsh Ministers in the Welsh Government. To that extent, this is something that the Welsh Government have welcomed. The noble Lord, Lord Hain, in a very fair analysis, said I had welcomed this agreement for the long term, which indeed I have. More importantly, perhaps, it was welcomed for the long term by Mark Drakeford, who said he regards the agreement as ensuring there will be,

“fair funding for Wales for the long term by implementing the funding floor recommended by the Holtham Commission”.

Those are his words. He is yet to give a full analysis, to be fair, but that is the press statement that he put out and it is notable that that is the view of the Welsh Government. I also stress that the Welsh Assembly will of course be having a say on the legislation in general when it considers the LCM, so no doubt we will be giving a view on this important part of the legislation, as well as the rest of the legislation, when it delivers that view. That is something that we anticipate.

I turn to Amendment 143A in the names of the noble Lords, Lord Hain, Lord Kinnock and Lord Murphy, which all three noble Lords have spoken to very persuasively. As I have indicated, we have a requirement under existing legislation, which we will take forward in relation to this new legislation, of an annual report that happens in November/December each year. We will seek to ensure that the impact assessment—the information that the noble Lords are seeking—is incorporated in that report. As I have indicated, it is partly the Treasury, partly the Wales Office and partly the Welsh Government; all three contribute separately to that report. I will seek to ensure that that information is there because noble Lords have made a very fair point. The Government have already published two such reports, so there is a template. Of course, I appreciate that the significance of the new income tax powers makes the next report somewhat different in nature.

I turn to Amendment 74 on the apprenticeship levy, in the name of the noble Lord, Lord Wigley. I have also spoken to him separately about this issue. To fund the step change needed to achieve 3 million apprenticeship starts by 2020 and to improve their quality, the Government are introducing an apprenticeship levy so that, by 2019-20, spending on apprenticeships in England will be double the 2010-11 level in cash terms. As has been indicated during the debate and in the letter I sent to noble Lords, the population share of the levy funding for the Welsh Government which will apply in the first three years is up on the present spending, as the noble Lord, Lord Rowlands, indicated. In the first year it will be £128 million; in the second year, £133 million; and, in the third year, £138 million.

The development of this policy on apprenticeships is entirely a matter for the Welsh Government. In England, those who put in money will get it back. It is entirely a matter for the Welsh Government or the Welsh Assembly as to how it is rolled out in Wales. Persuasive arguments have been put as to how the money should be spent but it is a matter for them. This is not something that the Government here would want to second-guess nor, clearly, are they in a position to do so. In response to the noble Lord, Lord Rowlands, the Barnettisation of the funding will be taken forward via the training budget of the Department for Education.

Noble Lords have perhaps gained the impression that officials are not speaking to each other and that there is no discussion on this. This is not the case. Discussions are certainly going on, for example in relation to cross-border arrangements where there will be employees in Wales benefiting from apprenticeships in England and vice versa. Discussion is happening because there clearly needs to be some dovetailing of arrangements. I am sure that things could have been done better—that is nearly always the case—but I certainly do not want noble Lords to think that nothing is happening in a cross-governnment way, because it is.

I am sure I can and I will make endeavours to do so. Clearly, this is related to the way in which the levy operates. This is a matter being conducted from Westminster, so I will endeavour to get this information for noble Lords. What I cannot do is indicate how it will be spent. This is a matter for the Welsh Government and the National Assembly for Wales.

I turn now to Amendment 80 on air passenger duty. In doing so, I wish to say how sorry I am that the noble Lord, Lord Rowe-Beddoe, is not in his place because of indisposition. I am sure we all wish him a speedy recovery. I know that he has very strong views on this issue; I have discussed it with him on many occasions. The amendment was moved formidably by the noble Baroness, Lady Finlay, with other noble Lords speaking in support.

The Government have considered the case and options for devolving APD to the Assembly, as we committed to do in the 2015 St David’s Day agreement. From extensive debates in Committee, noble Lords will be aware that there is an issue about state aid, particularly in relation to but not limited to Bristol. The noble Lord, Lord Kinnock, correctly indicated a competitive element with Birmingham. There is a competitive element with airports in the United Kingdom which is obviously accentuated with those that are geographically proximate. While we remain members of the European Union there is clearly an issue with regard to state aid rules that cannot be lightly ignored. I assume that that will not be the position once we complete the Brexit discussions and implement it, but that is some way into the future. I put that important issue on one side.

The rules certainly apply equally throughout the EU but you have to establish that there is a competitive element. The distance from Edinburgh to Newcastle, which would be the next nearest airport where there is no devolution of APD, is considerably longer—and, I think, is a considerably tougher journey—than that between Cardiff and Bristol. I think noble Lords would accept that. I suspect that it is longer than the distance from Cardiff to Birmingham as well, so there is that difference. In Northern Ireland there is a different issue. The issue there concerns the presence of an airport in a different member state rather than within the same member state. Therefore, the rules are the same but obviously the geographical issue is somewhat different.

I say to the Minister as a matter of record that I would gladly continue with the situation of the UK being subject to the state aid rules of the European Union, and retain membership, than have any other kind of relationship. That being said, however, the point made by my noble friend is absolutely valid; namely that within the United Kingdom a disparity of treatment is allowed under state aid rules because the authorities concerned have been able successfully to argue—rightly, in my view—that the market is not distorted by having arrangements in Scotland and Northern Ireland which differ from those in the remainder of the United Kingdom. Given the argument to which I referred in passing about the area to be served particularly by Cardiff if it were able to dispense with the passenger levy, I believe that under the current state aid rules it could certainly be argued that there is no distortion of the market because the form of competition that exists between international airports is not such as to be distorted by the operation of a different levy system in Cardiff.

My Lords, I hear what the noble Lord says. I think he would accept that it is a case of defining where there is a competitive market. The point I was making is that I think it would be much more difficult to suggest that there is a single market between Edinburgh and Newcastle in relation to air travel than there is between Bristol and Cardiff. I think that, factually, that must be the case. If you live in a suburb of Edinburgh, I do not think you would lightly consider going to Newcastle to catch a flight whereas, if you live in a suburb of Bristol, you might consider going to Cardiff and vice versa.

However, as I say, that is not the only argument that I am deploying. The point about giving a special tax status to Cardiff is the issue here. The Government cannot subscribe to that. However, we acknowledge that we will revisit air passenger duty at some stage. It may be appropriate to do so and decide how we approach it across the whole country as Brexit approaches, and in the light of decisions made on Heathrow and Gatwick. However, in relation to the specific issue, I am afraid that I cannot give any comfort to noble Lords who want me to move further than I have indicated.

It sounds as if the Minister, in winding up on the airport aspect, is dismissing the arguments we have made that the type of flight going into Cardiff would be quite different from the type of flight going into Bristol. They are not competitive but compatible. Given that, and the arguments we have made, will the Minister undertake to meet a few of us before Third Reading? Listening to the arguments, I do not quite understand why the Government are saying anything other than that they do not want to do it and that that is it—that is what I am hearing—rather than that there is true competition between the two.

My Lords, if I may say so, that is a somewhat unfair caricature of what I am saying. I am saying that we want to look at this in the round. We do not want to look at it just in terms of Wales, because there is a broad issue about what we do with air travel throughout England and Wales, and that is part of a much broader consideration. So I am not dismissing it out of hand and saying that this is something that the Government do not want to look at. We want to look at it in the round and not, in this legislation, in isolation, which we cannot undertake to do.

I believe that that has dealt with the mass of the issues here. I thank my noble friend Lord Crickhowell for his contribution, and particularly for what he said about the fiscal framework and the hard work that has been put in by officials from the Welsh and UK Governments, and indeed the work of the Welsh Treasury as well as of the Treasury here. It is a signal achievement that has been welcomed in the United Kingdom and in Wales—and, noting that we have Governments of different complexions, that is no small achievement in itself. So while it may not be perfect, it is a way forward. Of course, it is subject to review. Some noble Lords perhaps hinted at what happens now. The noble Lord, Lord Hain, indicated that there would be a review once there is convergence to 115%, which is the case, but thereafter there would be one no more than once in every Parliament; we anticipate that that would be looked at within every Parliament. That is important as well, and is something that has not happened previously.

With that, I ask noble Lords and noble Baronesses not to press their amendments.

My Lords, there are a number of huge and very different amendments to be considered in this grouping, so I hope that the House will be tolerant as I address the many key issues that need to be discussed under the broad heading of reservations.

Much of the debate on and scrutiny of the Bill have focused on whether particular subject areas should be devolved and form part of the legislative competence of the National Assembly for Wales. The tussle over exactly what the responsibilities of the UK and the Welsh Governments are is the focus of this Bill. Nevertheless, I am keen not to lose sight of the slightly more abstract and structural issues in the Bill, and of the lack of underlying principles—underlined by the Constitution Committee in the Lords—as to what should be reserved. The failure to have a Bill based on sound constitutional principles has created further complexity rather than simplifying and clarifying the approach, which is what the move from a conferred powers model to a reserved powers model was meant to deliver.

The Delegated Powers Committee and the Constitution Committee in the Lords have drawn attention to the broad interpretation that the courts have taken to the “relates to” test. The committees suggested that applying this test to a lengthy list of reservations—far longer than for other regional parliaments—could have significant implications for devolved competence. At best this will lead us back again to the Supreme Court and could reduce the competence of the National Assembly, often in areas where it already holds that competence.

The Minister sought to reassure the House of the impact of the purpose test, which determines whether a matter relates to a reserved matter, but we have no way of knowing how effective this will be. Never before have we seen a reserved powers model with as many reservations as we have in this Bill. My fear is that while many thought that the shift to the reserved model would facilitate the progress of devolution, it might turn out to have the opposite effect.

I will press the Minister on a specific issue, which relates to the purpose test and the way the Bill addresses whether the Assembly can make what is referred to as “ancillary” provisions. The fact is that the Welsh Assembly needs to have the facility to make laws, but just as importantly it needs to be able to enforce those laws. This enforcement role clearly would impact on the reserved area of justice. The Assembly would need the ability to step on the toes of the England and Wales justice system, despite not having the clear legal right to do so under the reserved system, in order to see through laws which come under its area of legal competence. Without this, the Assembly’s Bills will not work. This is not a new facility but one that already exists.

The Wales Bill follows the Scotland Act, but we have a very different situation from Scotland because so much more is devolved there, including the justice system. This restriction in Scotland has very little impact on the devolution settlement, but that is simply not the case for Wales. So the Bill remains complex and unclear. The Government have amended their Bill to remove the wording that makes the ancillary provisions so confusing, but this has led to a further problem because conferring functions on a court in civil proceedings would now become subject to a necessity test, which was not the case before. This necessity test has significant repercussions, because it will curtail the Assembly’s ability to enforce its own laws. When making provision to enforce the law, we believe that only one option would be available, and that is the one that has least effect on the law on reserved matters. The danger here is that defendants in a court case could routinely be able to raise in their defence the question of whether the relevant Assembly Act went beyond its powers. They might question whether the law really was the option that had least effect—whether it was “necessary”.

“Allowing the Assembly to modify these areas puts at risk the uniformity on which the single jurisdiction is based”.

He also said:

“The law on reserved matters is, by definition, not an area of the law that should be open to wide-ranging alteration by the Assembly in this manner. This is vital to effect a clear boundary between what is devolved and what is reserved”.—[Official Report, 7/11/16; col. 987.]

Here is where the fundamental flaw in the Bill lies—a flaw which runs through its spine and which has been there from the beginning of its drafting. It derives from 20th-century, pre-devolution thinking. How can it be said that, in a jurisdiction that has two legislatures, there is uniformity? There is not, there will not be and there cannot be. The justice system is not a subject that can be reserved with a clear line; it is a mechanism that a legislature needs in order to frame and enforce its laws. Until the Government accept that, the Welsh devolution system will be flawed.

I wonder whether the Minister might agree to a modification based on the words he himself used to describe the necessity requirement—a word I understand has been repeated by the UK Government in correspondence—namely, a change from the use of the word “necessary” to “proportionate”. It has been said that the intention here is to ensure that any relevant provision in an Assembly Act is proportionate, and that the Welsh legislature should have “options” in this respect. If that is the case, and if the UK Government truly believe that the Welsh legislature should have options, the test that should be applied should be one of proportionality and not of necessity. I would be grateful if the Minister could address that issue in his reply.

That is the heavy constitutional bit over. Let us turn now to issues that are much easier to relate to. I thank the Minister for listening to our concerns on a whole range of matters. The Government have agreed to our points that reservation on a whole raft of areas was simply unjustifiable and have recognised that in many areas in the Bill there was a push-back from powers that the Welsh Government already possess. I am very pleased that we have managed to come to an accommodation on so many areas, and that the following matters—I think it is worth listing the areas where we had particular concerns and where we have seen movement—will now no longer be reserved to the UK Government: water and sewage; heating and cooling; an involvement for the Welsh Government in maritime search and rescue; exceptions for social security in terms of financial assistance; adoption; planning of railways that start and end in Wales; the community infrastructure levy; compulsory purchase of land; and building regulations. We have to give credit where it is due. We are very grateful to the Minister for listening to our concerns on these matters and we are grateful that he has tabled his own amendments on those issues. They are not all where we want them to be, but the Government have listened and we are grateful.

The Lib Dems have submitted an amendment on the devolution of anti-social behaviour and dangerous dogs. We understand that there are times when it makes absolute sense to deal with anti-social behaviour at a local level. This is particularly relevant on some of our more difficult housing estates. We would, on the whole, support the narrowing of anti-social behaviour reservation, but not its removal altogether. We welcome the fact that the UK Government have already conceded to remove the housing element. However, the blanket nature of the Lib Dem amendment would devolve Parts 1 to 6 of the Anti-social Behaviour, Crime and Policing Act 2014, which is huge in scope. The amendment would mean devolving, among other things: the power of arrest, arrest without warrants, rules of courts and special measures for witnesses. We think that is probably going too far at present.

While the Government have, once again, not given a reason for not devolving powers over dangerous dogs, I can foresee many practical reasons against implementing two separate policies on this issue between Wales and England. Are we going to stop every tourist coming into Wales and check their dog’s DNA to see whether it complies with the Dangerous Dogs Act? Until we are satisfied that there would be a practical way to enforce issues surrounding dangerous dogs and narrowing the scope of the amendment, I am afraid we cannot support this suggestion.

I turn now to Amendment 82. There is no doubt that alcohol misuse is a major public health issue and a principal cause of preventable death and illness in Wales. It can lead to a number of health and social harms, particularly for a significant minority of people who drink to excess. Given these impacts and the direct links with devolved responsibilities for public health and the NHS, there is a pressing need to tackle alcohol misuse. The Assembly and the Welsh Government must therefore be equipped with a vast range of tools at their disposal. Policies that control the way in which alcohol is sold and supplied are widely acknowledged to be among the most effective mechanisms for tackling alcohol-related harms. The current reservations place unnecessary and inappropriate constraints on action to tackle alcohol availability in Wales. As of October, UK courts have declared in favour of the Scottish Government in this respect. There is no real justification in principle for why this matter should not be devolved to Wales.

Finally, I should like to focus on a particular area where we still have very real concerns. This relates to allowing the Welsh Government to have power over employment and industrial relations in the public sector. I refer to Amendment 90. Some have suggested that the whole purpose of the Wales Bill is to close off the ability of the Welsh Government to legislate on trade union matters relating to public services. We are aware that, during consideration of the Trade Union Bill in this House, a letter was leaked which confirmed that the Welsh Government had a strong legal case for resisting the attempt by the UK Government to curtail the power of trade unions in Wales in relation to public sector services which have been devolved under the conferred model. Government lawyers were aware of the previous Supreme Court judgment which suggested that Wales was in its rights to legislate on farmworkers’ pay, despite employment law being a reserved matter for the UK Government, as agriculture was and is a devolved matter. If that logic were carried through to the issue of trade union rights in relation to public services, then, under the current conferred powers system of government, it is clear on which side the Supreme Court would be likely to come down.

The Minister has been generous in recognising that in many areas there has been a pushing back of the Welsh Government’s current powers through the introduction of the new reserved powers model, and he has agreed to bring in an accommodation and to introduce exceptions in the new system to maintain the status quo in terms of the Assembly’s responsibilities. However, on the matter of trade union rights in relation to public services in Wales, the Government have been deaf to our concerns.

I make it clear that we are not asking for employment rights to be devolved wholesale. However, we are asking the UK Government to recognise that they have little, if any, understanding of how public services such as health and education are provided in Wales. They have demonstrated little recognition of the fact that the partnership approach to trade unions adopted by the Welsh Government has meant that we have not had a strike by junior doctors in Wales as there has been in England, and that the health boards and others who are responsible for the delivery of services think that imposing methods which may or may not be appropriate for England should not be imposed on Wales. Indeed, they think that doing so could be damaging and counterproductive.

However, I am concerned about a wider discussion here. The Secretary of State has said time and again that he would like to see this as the definitive Bill in terms of setting out the relationship between the Welsh Assembly, the UK Parliament and both Governments for the foreseeable future. The noble Lord will be aware that the Welsh Government will imminently introduce their own Bill on trade unions, which will overturn last year’s attempt by the UK Government through the Trade Union Bill to interfere in a devolved area of competence—namely, the provision of public services devolved to Wales. This will be introduced and accepted under the conferred powers model of government, and it will set the Welsh Government on course for a constitutional battle with the UK Government. If the UK Government insist on resisting the amendment, the only option open to them will be to refer the matter to the Supreme Court or introduce new legislation to overturn the new Welsh law. Far from putting to bed the issue of the relationship between the Welsh Government and the UK Government, not accepting the amendment will open up another constitutional front which will likely run for years and cost taxpayers millions of pounds.

If we do not receive assurances on this issue from the Minister, I advise him that we will be moving that amendment to a vote. I respectfully ask him to reconsider his attitude towards all the amendments that we are proposing but towards this one in particular to avoid a constitutional punch-up—something that we are all anxious to avoid.

My Lords, we are again dealing with a very disparate group of amendments. Amendments 76 and 77, which stand in my name, seek to ensure that the National Assembly can continue to legislate on ancillary matters. My amendments have a similar objective to that of the amendments tabled by the noble Baroness, Lady Morgan of Ely, about which she has just spoken and which I certainly support. They are based on amendments recommended by the National Assembly Llywydd, or Presiding Officer, Elin Jones. In Committee similar amendments were tabled and forcefully supported by the former Assembly Llywydd, my noble friend Lord Elis-Thomas.

This is undoubtedly a hugely complex, intricate and fundamentally confusing area of legislation. It is so confusing that, as was outlined earlier, we have seen a whole range of answers from a variety of Government Ministers on the issue. In the Commons, my colleagues were initially told that including a provision to legislate in an ancillary fashion would,

“drive a coach and horses through the key principle underpinning the new model”.—[Official Report,Commons, Wales Bill Committee, 11/7/16; col. 87.]

Later they were told that their amendments were simply not needed as they were already provided for.

Perhaps the closest we got to clarity was when we last debated this issue. In Committee, the Minister helpfully gave an extensive list of examples of where the Assembly’s legislative competence would not be hampered by the fact that it would no longer be able to legislate in an ancillary fashion. His hypothetical examples drew parallels with existing legislation in an attempt to enlighten us—but in all honesty I think that many of us were left scratching our heads. Why, if the Minister’s extensive list of examples is to be believed, is a provision allowing the Assembly to continue to legislate in an ancillary fashion not included in the Bill? This would give a level of consistency and clarity that is lacking in the current drafting.

The reason the current Llywydd and former Llywydd have called for this amendment is simple. The Llywydd of the National Assembly for Wales—indeed, the Presiding Officer or Speaker of any such legislative body—needs, first and foremost, clarity with regard to the powers and limitations of the body in question. Why, in this highly opaque area of legislation, in what is a hugely technical Bill, is the Minister choosing to instigate even further complexity and confusion?

As the Minister and his Welsh Office colleagues have reiterated so many times, we need a clear devolution settlement and not one that will further muddy the water. I can only assume that the Minister’s list of examples was an attempt to allay fears that his rejection of the Assembly’s ability to legislate in an ancillary fashion consituted a rollback of powers. However, I ask the Minister this simple question: if he does not seek to restrict the Assembly’s lawmaking powers, why oppose this amendment?

Sadly, I fear that restricting the Assembly’s powers is exactly what the Government are trying to do. For this reason, my party colleagues in Cardiff Bay requested that the Assembly’s research service should examine what Assembly legislation would have been outside competence if the Bill had been in place. Based on the work of Welsh Government lawyers, the research servie found that at least five pieces of legislation already on the statute book, and one Bill, would be outside the Assembly’s competence. This includes the Education (Wales) Measure 2009, Control of Horses (Wales) Act 2014, as well as flagship Welsh Government policies such as the Human Transplantation (Wales) Act 2013 and the Environment (Wales) Act 2016, which introduced the carrier bag charge.

Undoubetdly, the seemingly unending list of reservations was in part to blame for this. However, the removal of the Assembly’s ability to legislate in an ancillary fashion was the underlying factor which led to the uncertainty over whether these pieces of legislation would henceforward have fallen outside the Assembly’s competence.

As we know, the provisions of this Bill are not retroactive, so these Acts and measures will continue to hold true following the passage of this unwieldy Bill. However, the Minister surely can do little to do defend himself against claims that his refusal to accept these eminently sensible amendments is nothing but taking control away from the National Assembly and placing it in the hands of Westminster and Whitehall. I have to say that my colleagues in Cardiff Bay are incandescent about this and that a Bill facilitating such a reduction in powers is frankly unacceptable. I therefore support the amendments.

Many of the arguments also impinge on matters covered by Amendment 78, standing in my name and the name of my noble friend Lord Elystan-Morgan, but I shall keep myself in order as it has not yet been moved, and leave it to my noble friend to make the case in a few moments’ time.

I will allude also to Amendment 82, standing in my name and in the name of the noble Baroness, Lady Finlay of Llandaff, relating to enabling the Assembly to address alcohol-related issues. I shall leave it to the noble Baroness, who has a very impressive track record on such matters, to speak to that amendment, on which she has my full and enthusiastic support.

Amendment 85, standing in my name, should in fact have been grouped with the earlier amendments dealing with water, which have already been debated. Therefore, I shall not now speak to that amendment.

That brings us on to Amendment 92 standing in my name, which I do intend to speak to—but only to note that the compulsory purchase of land was on the list of reservations in the Wales Bill. However, I see now, at this late stage, that government Amendment 92A has been tabled and will achieve the devolution of this important function. The compulsory purchase of land is an essential facet of an array of devolved areas, including highways, planning, education services, housing provision and the health service. I welcome this move by the Government and thank the noble Lord, Lord Bourne, for listening to our concerns. I will therefore, having made those points, not press my amendment.

In conclusion, it is important to realise that, although some very worthwhile progress has been made, the Government must shift their ground on the issue of legislating on ancillary matters. Otherwise, they are heading for bitter confrontation—and that is not something that any of us want.

My Lords, I rise to speak to Amendment 78. However, before so doing, I want to say first how delighted we are that the Minister is safe and sound with us. I must say that a doleful bell rang in my memory. In 1968, I was a Minister in the Home Office and on that particular day had Question 77 to answer. I was assured by somebody who might have known better that there was no prospect whatever of it being reached. However, in my nonconformist ignorance, I had not realised that it was Epsom week and that a large swathe of a particular party was disporting itself at Epsom. I still regard other persons as having some responsibility for that. On the other hand, there was a high degree of contributory negligence on my own part. However, we are very delighted that the Minister is with us. I doubt whether any Minister has ever attended a Bill with greater integrity, enthusiasm and candour as has the noble Lord, Lord Bourne, in this matter.

I wholeheartedly support everything that the noble Baroness, Lady Morgan of Ely, put forward as a background to the matter my proposed amendment deals with, which is demarcation. It is an attempt to try to draw a clear and understandable line between the authority of this Parliament and the authority of the Cardiff Assembly. As one brought up in the countryside, I have always espoused the adage: good fences make good neighbours. I have no doubt that there is massive truth and realism in that in relation to constitutional matters.

Devolution is both an end in itself and a means to an end. Essentially, what it means to me is that it is possible for a number of communities within the same kingdom and the same sovereign state to be able to share responsibilities of an administrative and, more particularly, legislative nature. That can be done only if there is a clear understanding of where the equitable point of balance—the watershed—exists in relation to the division of the two bodies. How do you find that? You do not find it in any criteria set down by a court of law or in an Act of Parliament; nor, if I may say so, do you find it in the learned writings of eminent jurists. You find it in each case by using instinctive common sense and an understanding of the justice of the situation.

If we look at European sub-Parliaments, there is no clear, consistent rule as to exactly where the boundary is drawn, but they have all espoused a common approach to the problem. It has been an approach that they accept, historically and socially: that there is what might be called a watershed and that certain matters flow inevitably to the general sovereign Parliament, while others inevitably and physically flow to local decision. That is the way that we should approach this matter in relation to Wales.

Of course, that has simply not happened. It is not as if the Government had set out their criteria for deciding what was local and what was general. As far as the outside world is concerned, it is a wholly haphazard ragbag of reservations—197 of them. I have looked carefully at the situation in Scotland and Northern Ireland and there is nothing approaching that concentration of reservation in either of those countries. Indeed, it is not just a question of the number of reservations, but the sheer triviality. One could spend many doleful hours going through those lists.

I shall not repeat what I have said on more than one occasion in the House on that, but I will say that the Minister, as an able and distinguished professor of law, will know full well that under certain local public health Acts and local government Acts over the last century and a half, it was possible for local authorities of a modest nature to adopt certain modest rules. They effectively became local law. That happened on scores and scores of occasions. The Minister is probably in a better position to advise the House than anybody else, but interestingly, many of the 197 exceptions that we have would have been included in those very provisions. Is that not a massive irony?

My case therefore is this. The Government, intentionally or unintentionally, have managed to make a thorough and chaotic mess of this situation. There is no rationale as to why certain matters are reserved and others are not. No criteria are suggested at all. In so doing, a very great disservice has been done both to the principle of devolution and to the principle of subsidiarity, if there is a difference between the two. One may very well argue that one is talking about the same central principle. But as the matter now stands Her Majesty’s Government have devalued the whole principle of devolution and trespassed on the noble principle of subsidiarity, cynically reducing it to something wholly ineffective.

The purpose of the amendment is to seek not so much to cure the situation in which we now find ourselves, because that would take something much more fundamental, but to start a process of examining it in detail. The amendment would impose on the Secretary of State for Wales the obligation to set up a working party to report within three years on the operation of each and every one of the reserved matters, and to report to Parliament regularly on such progress. That would not answer the question altogether, but it would be a helpful way of approaching the problem. That working party should represent as broad a social and political spectrum as is humanly possible.

Perhaps I may make a suggestion to the Minister. If the Secretary of State wants to use something off the shelf to address this matter, he could do far worse than ask the Silk commission to sit again and consider this point. The Minister knows more than anyone else in the House about the commission, having for many years been one of its most distinguished members. The commission has reported on two occasions in a mature, diplomatic and thorough manner on Welsh constitutional matters, and it could do so again. On that basis, I urge the House to consider that this amendment is of real constitutional importance. It does not completely cure the problem but it is a hopeful way of setting about resolving it.

My Lords, it is always a great pleasure to follow the noble Lord, Lord Elystan-Morgan. As I have told your Lordships before, I voted for him in 1964 when he was a Plaid Cymru candidate. I know that he has recovered from a serious illness to play an important part in this Bill and we are all very pleased to have him with us today. When he talked about the advantages of building a fence between neighbours, I wondered whether he was proposing to build one between England and Wales. I would support him in that—particularly if the English have to pay for it.

In preparation for this debate I spent the new year viewing five or six episodes of S4C’s excellent series “Y Gwyll”—“Hinterland”—kindly provided by S4C at its Christmas party before the break. It is a somewhat grim picture of policing in a rural Welsh community. I had some interest in that because my first five years were spent in Llangollen police station where my father was the station sergeant. His territory covered a large area of rural Denbighshire.

In one of the episodes of “Y Gwyll”, Chief Inspector Matthias has to confront a man armed with a shotgun in a remote cottage high up in the hills. It rang a bell since my father had to do precisely that. As my father approached him, the man shot himself rather than my father. In the denouement of the series, broadcast over the Christmas season, the retired chief superintendent turned out to have murdered the policeman investigating his past while his replacement, the current chief superintendent, murdered his predecessor in turn—which did not accord with my memory of the Denbighshire constabulary of those days.

The series depicts the Welsh language, the people, the way of life, the rural remoteness and the stretched facilities, emphasising the different society and community in which we live. It is not surprising that a significant majority of Welsh people, when asked for the purposes of an opinion poll in connection with the Silk commission, were of the view that the Welsh Assembly and the Welsh Government should have responsibility for policing in Wales. Indeed, devolution of policing was supported by the Welsh Government, the chief constables, the majority of police commissioners, the Police Federation and other professional police bodies.

The Silk commission reported in favour, although it was careful to say that the devolution of the governance and administration of the police would not involve the devolution of legislative competence for police powers or the criminal law. It also did not recommend devolution of matters dealt with at the UK level by the National Crime Agency—serious and organised crime, fraud, cybercrime and child protection. However, proposed new Section B5 of Schedule 1 to the Bill reserves policing to the Home Office—and that is an argument for another day.

My Amendment 81 deals with subsidiarity, leaving out the reservation of anti-social behaviour to the Westminster Government which the Bill proposes. Anti-social behaviour is essentially a matter for the local community. That is what is reflected in all the parts of the Anti-social Behaviour, Crime and Policing Act 2014 that are specifically reserved in proposed new Section B6 of Schedule 1 to the Bill.

Under Part 1 of the 2014 Act, which deals with injunctions, applications for an injunction may be made by a list of bodies, the first of which is the local authority. The next one is a housing provider, and only third on the list is the chief officer of police. Other bodies which may apply for an injunction include the Natural Resources Wales body and Welsh Ministers exercising security management functions.

Similarly, under Chapter 1 of Part 4, community protection orders, the initiative to issue a community protection order against an individual or a body lies with the local authority, where it is satisfied on reasonable grounds that the conduct of that person is having a detrimental effect of a persistent or continuing nature on the quality of life of those in the locality, and that the conduct is unreasonable. It is for the local authority to apply for the order and to take action if the individual or body fails to comply with the notice.

Your Lordships will see that anti-social behaviour is already dealt with at the local authority level. In Chapter 2 of Part 4, it is the local authority alone which may make a public spaces protection order if it is satisfied on reasonable grounds that activities carried out in a public place within the authority’s area have had a detrimental effect on the quality of life of those in the locality and that the activities are unreasonable and of a persistent or continuing nature. Again, the local authority applies for the order, the local authority enforces it.

Under Chapter 3 of Part 4, power to make and exercise a closure notice for premises associated with nuisance or disorder rests with either a police officer of at least the rank of inspector or the local authority.

Part 5 gives power to landlords to recover possession on anti-social behaviour grounds, and Part 6 is headed “Local involvement and accountability” and lays down requirements for the police to consult with local authorities and community leaders in the preparation of community remedy documents, the purpose of which is to require an individual to carry out certain specific actions.

The whole of Parts 1 to 6 of the 2014 Act is concerned with what a local authority, in the main, or a local policeman does in relation to problems within the community. It indicates how localised the legislation is. It is only sensible because other agencies which are concerned with the same sort of thing are devolved—the health service, education, ambulance and fire services, and so on.

The other powers reserved to Westminster in Section B6 refer to dangerous dogs or dogs out of control. It is a perfect example of why this should be devolved—devolution works. I am sure that many of your Lordships will recall the Dangerous Dogs Act 1991. It was regarded as an example of knee-jerk legislation and has always been thought to be utterly unsatisfactory. After toying with the idea of pet anti-social behaviour orders, an idea first put forward in the satirical political show “The Thick of It,” the Government passed Part 7 of the 2014 Act, which made some patchwork reforms. It is still not satisfactory.

Meanwhile, up in Scotland, the Scottish Parliament passed the Control of Dogs (Scotland) Act 2010, which dealt with the whole question comprehensively and sensibly. The initiative in Scotland lies not with the police but with an authorised officer who is defined as an officer appointed for that purpose by a local authority. Each local authority in Scotland must appoint at least one such officer, skilled in the control of dogs and with the capacity to instruct and advise others in matters relating to the control of dogs. The Act deals with the control of dogs and with the prosecution and punishment of owners of dangerous dogs in Scotland. Why does Westminster want to reserve to Westminster power over dangerous dogs and their control when Scotland has legislated so effectively? We have passed—or, rather, the Welsh Assembly has passed—the Control of Horses (Wales) Act 2014. If the Assembly can be allowed to legislate for the control of horses, why not dogs?

When I was living in the Llangollen police station, we had a Pembrokeshire corgi called Rex who, having been reared by my aunt, only understood Welsh. He was not one of those brown and white royal jobs—he was a proper dog, black and white with a long tail. During the last election, my wife, the noble Baroness, Lady Walmsley, and myself were canvassing near Pistyll Rhaeadr, the famous waterfall in Montgomeryshire, one of the seven wonders of Wales. She came to me rather disturbed and said that there was a dog in the next farm and that it was a bit snappy. I patted her rather condescendingly on the head, said leave it to me and went through the gate. Sure enough, there was a black and white Welsh collie, which kept jumping up at me. I said, remembering my youth, “Steddwch”, which means “Sit”—and the dog bit me. Surely, that was an issue not for Whitehall but one for Cardiff.

My Lords, how to follow that? I shall speak to Amendment 90 in my name and in those of my noble friends Lord Murphy, Lord Kinnock and Lady Morgan. I begin by expressing my disappointment that the Minister has not been able to persuade the rest of the Government to think again on this issue and that they continue to press ahead with their transparent move, not simply to go beyond overriding decisions that the Welsh Government have taken since 2011, but deliberately to claw back powers from the National Assembly. From everything the Minister has told your Lordships, and much of what the Bill contains, this is supposed to be a pro-devolution, not an anti-devolution, Bill. But in the way in which devolved public services are configured, and especially their staff relations organised, it is repatriating powers that are already the preserve of the Assembly. Surely, that cannot be right.

When we considered this amendment in Committee, the Minister acknowledged our shared belief that employment law is, and should remain, a reserved matter. He said that,

“the underlying legislative framework concerning rights and responsibilities in the workplace must be reserved”.

I agree with that. He went on to say that the,

“system we have allows workers to be clear on their rights, whether they are in the public sector or the private sector”.

Again, I agree. However, he then said that this,

“is a fundamental principle and I cannot accept that the law underpinning the terms and conditions of public sector workers should be different from the law that underpins the rights of other workers”.—[Official Report, 15/11/16; col. 1384.]

On that point, we diverge.

My noble friend Lady Randerson spoke previously about the fact that the Welsh Assembly has long had considerable powers—for example, over doctors’ pay, terms and conditions. The principle has been conceded and accepted by the Government, ironically, as it has been in this very Bill in another respect. A government amendment to give the Assembly legislative competence over teachers’ pay and conditions has been accepted as part of this Bill. For the Minister to somehow then argue that it is impossible to disentangle fundamental employment rights from the terms and conditions of employees in the devolved public services seems somewhat irrational and contradictory, to say the very least. For the sake of clarity, I hope the House will permit me a short time to highlight the four different elements of this and to unpick a number of aspects that have been conflated during previous debates.

The four interrelated and interconnected but unique things that we are discussing are: first, employment rights and duties; secondly, industrial relations; thirdly, employment terms and conditions; and fourthly, collective bargaining. As we have already established, I do not believe that employment rights and duties—industrial action, unfair dismissal, equal pay, paternity and maternity rights, for instance—should be devolved, but as the earlier illustrations about doctors and teachers show, employment terms and conditions are a separate issue. I am talking about employment terms and conditions, not rights and duties.

The amendment before us today does not undermine the basis for England and Wales’s collective bargaining arrangements, something which is outside the scope of this Bill. Nor does it erode employment rights by creating a situation where differential rights will be available to workers in different parts of the United Kingdom. This, by the way, is of considerable importance to all of us in the context of the Brexit negotiations. None of these scenarios would be welcome to me, to the Welsh Government or to the Wales TUC. Instead, the amendment permits the National Assembly for Wales and the Welsh Government to continue managing and adapting the social partnership arrangements they have painstakingly established over many years to strive to deliver the world-class public services in Wales that the public deserve and expect.

I remind your Lordships and the Government that many of the public sector disputes afflicting England have not happened in Wales. As my noble friend Lady Morgan said, the doctors’ strikes come immediately to mind; they did not happen in Wales because the Welsh Government, with the backing of the Assembly on a cross-party basis, has had the powers to organise its employment terms and conditions differently—exactly what this amendment addresses. I do not have time today to rehearse many of the arguments we considered at Second Reading and in Committee. Needless to say, I have not been convinced by any of the arguments put forward by the Minister in response to those debates. It is clear to me that the UK Government are intent on clawing back the competence from the Assembly in relation to the delivery of public services and believe they have found a way to ensure that the flexibility offered by the unanimous Supreme Court ruling in 2014 can be removed by this Bill. That is unacceptable.

We have all appreciated the way that the Minister has generally responded in a conciliatory manner to arguments on the Bill from Opposition and Cross-Bench Members. We know he has Wales’s interests at heart, as we all do. I plead with him to think again. If there is some technical drafting issue, then by all means let the Government now offer to bring forward a redraft of this amendment, possibly at Third Reading. Otherwise, I will have no option but to divide the House over a very important matter that is very likely, without a government reconsideration which I hope he will, even at this late hour, address, to provoke a dispute with the Welsh Government and end up in the Supreme Court again. What a sad epitaph that would be for an otherwise well-intentioned Bill and an otherwise well-intentioned Minister.

My Lords, I will confine myself to Amendment 78 in the name of the noble Lord, Lord Elystan-Morgan. I am not going to repeat my Second Reading speech, in which I complained vehemently of the inclusion of such a huge number of reservations. I welcome the words of my noble friend Lady Morgan on the announced changes by the Government so far in, as I understand it, limiting them. The Wales Office has only limited experience in legislating, in drafting and in fighting its own corner to get its own way with other departments in Whitehall.

In drafting the original Welsh devolution proposals in the 1960s, I faced the same dilemma of how to deal with the self-interest of many departments in Whitehall, for which, “Devolution is all right provided it does not encroach on my back yard”. What we did then was to set up a Cabinet committee, meeting twice a week under the chairmanship of deputy Prime Ministers, and to have seconded to it rising stars from the Cabinet Office to guide it through and ensure that the Minister got his own way. In the fullness of time each of these two gentlemen became Permanent Secretaries in major departments in Whitehall—that indicates the weight of the input. The combination of such people as Ted Short and Michael Foot in turn knocked heads together. We knew what we wanted and got our Bills into shape. My advice on this occasion is for the Wales Office to enlist someone from the Cabinet Office to knock heads together. Regrettably, this Bill has the finger marks of every department in Whitehall trying to preserve its own corner.

It takes a combination of the resolve of a Secretary of State and his advisers to get the right Bill and not succumb to the blandishments of other departments in Whitehall, enumerated by the great number of reservations in the Bill. I fear that the first result will be a field day for litigants, particularly if we have again a trigger-happy Attorney-General. It will not be the end of the matter. The noble Lord, Lord Wigley, illuminated at least one of the instances where we can face litigation. The second result, as sure as God made little apples, is that we will return to this issue time and again in order to seek a permanent settlement, which we all wish for, for Welsh devolution. Hence, the best line of defence for the Government is a committee, as proposed in Amendment 78 in the name of the noble Lord, Lord Elystan-Morgan, to report on the functions and powers and see how we are getting on; whether I and others are right or whether the Government are right. At least, within a period of three years, we shall know and report to the House, possibly for a debate on the developments that have taken place. Then perhaps, after that cooling-off period, as it were, we might have a more mature and resilient approach to Welsh devolution, which will then be a permanent one. That is my hope.

My Lords, I have Amendment 82 in this group. It is a question, as my noble friend Lord Elystan-Morgan said, of flow. The problem for Wales is the flow of alcohol: Wales does not have the ability to control how that flow starts and how that supply chain moves. We in Wales are lumbered with the costs of alcohol abuse, both direct and indirect. There are direct costs in health and social care and indirect ones in damage to other people, either directly to another person or secondarily, through bereavement and so on. There is a real problem of culture around alcohol consumption in Wales. We should remember that while Scotland has the same culture of drinking, it has been given a degree of control. I fear that it is not always a pretty sight. Things have improved greatly but the Welsh Government does have to have the powers to do something about it.

There is another aspect of this that needs to be considered. We understand very little, really, about the way that alcohol interacts on the brain and on the reward centre, on people developing cravings. It is quite possible that the epigenetics mean that when you have a background culture of a family where there has been drinking, an individual’s reward centre responds differently. It may just be that people in Wales, having been born into a culture of drinking are more predisposed, more likely to develop an addictive tendency towards alcohol. It seems bizarre, when this is such a social problem and when the costs are really all borne at a local level, that the ability to control it is not given to the very Government that has responsibility for dealing with those problems.

My Lords, I would like to say a few words about Amendment 90. I will not stray into the internal affairs of Wales but this matter came up in debating the Trade Union Bill last year. The noble Baroness, Lady Morgan, mentioned the need for sound constitutional principles. I think that supporting sound constitutional principles should lead us to resist Amendment 90—which, to use a term of the noble Lord, Lord West, represents mission creep.

The amendment looks fairly innocuous and can be split into two parts. On “Terms and conditions of employment”, we keep hearing how Wales has managed to escape difficulties with doctors and has an excellent education system—although I am not sure whether the recent OECD figures bear that out—thanks to its ability to deal with terms and conditions. But, when you move on to the next bit of the amendment, “and industrial relations”, you open up a Pandora’s box. Given the Explanatory Notes accompanying the Bill, once you admit that industrial relations in Welsh public authorities are a devolved matter, you open up a huge area of debate as to what constitutes a public authority or industrial relations. For instance, could you have a different minimum wage for public servants in Wales or would you then get disputes between the private and public sectors?

I acknowledge that the noble Lord represents Conservative trade unionists, which must be a noble and valiant role to play, but the definition of public services is in the legislation passed by this House. It is set in statute; there is no question of redefining it or inventing new public bodies. It is all defined and the amendment repeats that.

I thank the noble Lord for his intervention, but I am sure that there would be plenty of room for disputes; this would not end the dispute. Perhaps the Supreme Court is needed to rule on this, but the proposed clause would not help us to go forward in any way. It is a slippery slope. We have a difficulty and clearly it needs to be defined. If this clause were passed and added to the Bill, it would not be the end of the matter; it would actually complicate matters and make them more confused. I make a practice of reading absolutely every scrap of paper that comes to me from the TUC—not a week goes by without something arriving—and, if this were such an important matter, I wonder why no one has asked me to support or even consider supporting this clause. It is sheer opportunism.

My Lords, the point is that under the conferred powers model of governance at the moment, we already have this power. It is in the move to the reserved powers model that we are losing this power. That is why we are so outraged by this move.

Well, some see it as that. I see it as a clarification that was needed—something that became quite clear last year. I suggest that we resist this amendment. It will not take us anywhere further forward and I am not sure that it is useful. It will open up many further legal cases and I hope that the House will reject it.

My Lords, I will make clear my strong support for Amendment 90, for the reasons that have been made clear on both sides of this debate, and from my own experience as a trade union member and a manager in the public sector in Wales at different periods of my life. I will confine myself, as I have during the course of the Bill, to the constitutional principles—if I may use the term again—rather than discussing specific subjects.

This is where I have to disappoint three of my noble friends. The noble Lord, Lord Elystan-Morgan, is a very old friend—I mean old in terms of our association, since I believe I first met him in a Crown Court in Ruthin in the very early 1960s. I hasten to add that I was not the defendant; my father was a witness there. With the noble and learned Lord, Lord Morris of Aberavon, I had the pleasure of discussing issues as soon as I arrived in the other place as a very young Member of Parliament. The noble Lord, Lord Wigley, of course came in with me at that time. I shall disappoint all three by expressing my considered view that we no longer need working groups chaired by Secretaries of State—although I recognise that a Secretary of State is present at the Bar of the House today, along with one of his ministerial colleagues.

After the time that I have spent on devolution legislation in this House, and particularly on this Bill, my view is that we have come to the end of a chapter in the making of devolved legislation as it affects Wales. It has been the chapter of the handing-down of powers, whether in a conferred model or a reserved model. The key issue to me was not how much was conferred or would be reserved, but how much was and will be exempted. That has been the model that has been operating. It is one that I operated for three terms as the presiding officer in Cardiff and it was never easy, although I had to deal with some Secretaries of State—two of whom are sitting here on these Benches—who always sought to accommodate my constitutional concerns. I am grateful for that, but it should not be about Secretaries of State having to make accommodations with the National Assembly in future. It should be about the National Assembly and the Government of Wales being an equal partner in constitution-building in the United Kingdom.

This view has been expressed strongly by the Welsh Government in their recent submission, before Christmas, to the Supreme Court. We have of course yet to see the results of those deliberations, but the definition of the United Kingdom as an association of equal nations impressed me very much when I first read it in the Welsh Government’s case, as it ties in with the way that I have approached politics and my role in this House. It is now incumbent upon us to argue that any future discussions about the development of the constitution—indeed, any criticism of the existing constitution—should be conducted on a basis of equality between the legislature in Cardiff and the legislature at Westminster.

I know what the Minister will say: he will refer to the sovereignty of Parliament. Of course, as some sort of constitutionalist, I understand what is meant by “the sovereignty of Parliament”, but, with all due respect to this House and the other House, in reality that sovereignty is the legislative aspiration on the part of the Parliament—because, clearly, the sovereignty of Parliament, by its own decisions, has been delegated in different areas. This is the nature of devolution and we are now in a situation where the Parliament at Westminster has devolved powers to Wales and created a legislature that has had primary legislation since 2011. That legislature should therefore be treated as an equal partner in any future discussions.

Does my friend, the noble Lord, Lord Elis-Thomas, accept that whatever might be said about the purity of the principles that he puts forward—principles which the late Professor Dicey might very well have approved of—there is nevertheless a huge gap to be made up between the situation that existed on the day in July 2014 when the judgment was given in the agricultural workers’ cases, and the consequences of the Bill? To my mind, the gap in terms of actual devolution might be 20%, 30% or 40%. It is massive and until that gap is made up the noble Lord’s theory, for all its general attractiveness, does not really apply.

I appreciate being given the authority of Professor Dicey but the real situation is that these issues will be resolved through the public political debate that will continue about the constitution of Wales and all other constitutions, because that is the sign of a vibrant democracy. It is therefore not an appropriate subject for a working group, led by a Secretary of State or whomever—and I would say the same thing about a working group led by the First Minister of Wales or the Presiding Officer of the Welsh Assembly or the Lord Speaker or the Speaker of the House of Commons. The issue is not about how that debate takes place: it is whether we need to place in statute, on the face of the Bill, the creation of a working group that would somehow have responsibility for delivering Wales from any constitutional weaknesses that it has as a result of the Bill.

My Lords, I speak against Amendment 90 in the names of the noble Lord, Lord Hain, the noble Baroness, Lady Morgan, and other noble Lords. The purpose of this amendment is to devolve in part legislative competence for employment and industrial relations to the Welsh Assembly. The noble Lord and others argue that this is consistent with the Supreme Court judgment in respect of the Agricultural Sector (Wales) Bill. In this instance, the court held that the case related to multiple subjects, and thus fell within the competence of the Welsh Assembly. It should be pointed out that the Supreme Court ruling concerned a situation where the devolved subject of agriculture was specifically in play. Indeed, in another Supreme Court case involving the Welsh Government’s competence in relation to recovery of medical costs, the court followed the same approach as in the agricultural sector but came to a completely different conclusion, deciding that the area in play was not devolved.

It would be unworkable to have different employment laws applying in different jurisdictions in Great Britain. As we have previously pointed out, the Smith commission in Scotland recently considered this issue and concluded that employment and industrial relations law should remain reserved. I appreciate that the noble Lord, Lord Hain, has argued that the amendment is not intended to change the reservation of employment law, and we all agree that employment and industrial relations law must remain reserved matters. However, in principle, “terms and conditions” derive from all aspects of employment law—for example, the national minimum wage, parental leave, and dismissal laws—and I believe that there is sufficient flexibility under the statutory framework of employment law for employers to configure their own terms and conditions.

The purpose of bringing in a reserved powers model for Wales to replace the conferred powers model is to bring greater clarity to the respective responsibilities of the UK Parliament and the Welsh Assembly. It is therefore somewhat dismaying that the noble Baroness, Lady Morgan, has told the House that the Welsh Assembly intends to pursue a Bill under the conferred powers model that will only diminish such clarity and cause legal wrangling. My fear is that Amendment 90 will reduce the very clarity that this Bill seeks to achieve. In effect, it could also create a two-tier system, with different employment and industrial relations legislation applying to public, as opposed to private, services in Wales, and, indeed, the whole public and private sectors in England and Scotland. I therefore support the Government in opposing the amendment. There is already a lot of flexibility for employers, but employment and industrial relations law must remain reserved matters to ensure clarity in the free flow of labour across Great Britain.

My Lords, there are many issues on which I find myself in agreement with the noble Lord, Lord Balfe. There used to be more, it must be said, in a different political lifetime, but I greet with some dismay the fact that I have to diverge from him on this issue, simply because he is wrong. I particularly pursue the point made in her intervention by my noble friend Lady Morgan. The noble Lord, Lord Balfe, used the term “mission creep” to describe Amendment 90. Of course, that can be employed as a derogatory description of any development. If we put it in the context of devolution, however, we could categorise devolution entirely as “mission creep” because the whole proposition on which it has been based in this country—and perhaps, indeed, in biology, from which it derives—is that there will be an accretion of competences as time passes and the sophistication of devolved Administrations and legislatures takes place.

No, it is the definition of the fact that when confronted with reality, I try to make it work. Consequently, while I retain some reservations about the whole way in which devolution is taking place in the United Kingdom, I am utterly in favour of decentralisation of administration and decision-making, which any democrat must be, but would quarrel with the sectional and selective form of devolution that is taking place. I would argue on another occasion that, had we undertaken in 1979, let alone in the 1990s, the form of devolution that I and some of my colleagues, including my noble friend from Pontypool, were then advocating, there would have been devolution throughout the whole of the United Kingdom. Perhaps we would not be confronted with the constitutional mismatches and disequilibria that confront us now, especially when we are faced with the prospect of the disaster of Brexit. I will return to that on a different occasion.

I say to the noble Lord, Lord Balfe, that the accretion of competencies that has taken place is in the nature of devolution. Indeed, the Minister could take justifiable credit for producing a Bill that assists in the clarification and strengthening of the whole devolution process. I hope that the noble Lord, Lord Balfe, will welcome the redemption of the Conservative Party, which, back in 1979, took a view that was almost as enlightened as mine on the issue. The most important point—and it is fundamental to this amendment and this Bill—is that the argument in favour of Amendment 90 is that those powers currently exist and they manifestly work. I am therefore employing, in a sense, a conservative argument in saying, “If it works, don’t fix it”.

What happens in Wales—and has happened for several years past—is that the powers advocated for retention in this current set of arrangements for devolution should remain: not that there should be mission creep, but restoration of the status quo. I say to the noble Lord, Lord Balfe, that surely, in his changed political prism, he would recognise and wrap his arms around the principle of the maintenance of the status quo that works. It is on that basis that I hope the Minister will give further consideration to these arguments and retain a set of arrangements that work, that are warmly endorsed by everybody involved in Wales, and that do not constitute the difficulty of definition suggested by the noble Baroness, Lady Finn, in discriminating between public and private employers. The terms on which this measure, if accepted, would be retained, properly describe where the responsibilities and obligations would lie and be exercised. It works now; do not fix it.

My Lords, I thank all noble Lords who participated in the discussion on these amendments. I will begin with Amendments 75 to 77 and 79, which seek to broaden the circumstances in which the Assembly could legislate in relation to reserved matters. I will first deal with an issue that was raised by the noble Lord, Lord Wigley, concerning the phrase,

“ancillary to a provision of any Act”.

I took him to mean that this was not provided for in the Bill. It is in fact expressly provided for in Clause 3, in subsections (3)(a) and (b) of new Section 108A. It says,

(b) has no greater effect otherwise than in relation to Wales, or in relation to functions exercisable otherwise than in relation to Wales, than is necessary to give effect to the purpose of that provision”.

So there is express provision in relation to “ancillary to” and how that would operate, and I hope he finds that of some comfort.

I appreciate that, but I think the noble Lord made a broader point about “ancillary to” not being provided for. I shall move on, if I may, to deal with some of the issues that noble Lords raised about this part of the Bill.

The amendments tabled are similar to those debated in Committee where, as has been acknowledged, I provided noble Lords with a detailed explanation of how the purpose test in the new model is intended to operate. As I made clear then, for a challenge of ultra vires under the reserved powers model to succeed, a case would need to be made that an Assembly Act provision was outside competence because its purpose related to a reserved matter. I think it is common ground among noble Lords that that much is appropriate. If such a case could not be made, the provision would satisfy the requirements of new Section 108A(2)(c) and would be within competence, provided that it satisfied the other requirements of new Section 108A.

In response to the noble Baroness, Lady Morgan, I want to clarify the important issue of how the Assembly can legislate in a way that is ancillary to a non-reserved provision but affects the law on reserved matters. As I set out in Committee, the purpose test is crucial to determine whether a provision in legislation is within the Assembly’s competence. Only once a provision’s purpose has been determined as not relating to a reserved matter would an assessment need to be made of whether it modifies the law on reserved matters and, if so, whether it is ancillary to a matter that is not reserved. If a provision is ancillary, it will also, as I have indicated, be subject to an additional test of having no greater effect on reserved matters than is necessary to give effect to the provision’s purpose in order to be within the competence of the Assembly.

In Committee I gave the House some examples of how the purpose test might be applied, and in particular how a provision that could engage reservations would be within competence if it had a devolved purpose and was ancillary to that purpose either by being appropriate for the enforcement of such provision or otherwise to give effect to it, or was consequential or incidental. Those examples were hypothetical but included: a requirement for tenants to insure their residence; the creation of competitive tendering requirements for local authorities; an extension to the jurisdiction of the Agricultural Lands Tribunal for Wales; and information sharing between Welsh schools and Estyn. In each case we argued that, as the purpose of the provision was devolved and the provision could be characterised as ancillary, it was within devolved competence if it had no greater effect than necessary on the reserved matter. Potentially any provision in Assembly Bills about enforcement would engage the reservation for the courts and their jurisdiction, or that for civil or criminal proceedings, but provided that it is required to enforce or give effect to a devolved purpose, such provision will be within competence even though it impacts on the law on reserved matters, subject always to the test that it has no greater effect than necessary on the reserved matter.

Comparisons have been made with the settlement in Scotland and how this “greater effect than necessary” test applies to it but, when considering that, it is important to note that the restriction on legislating about the law on reserved matters in paragraphs 1 and 2 of new Schedule 7B gives the Assembly wider scope to modify the law on reserved matters than the Scottish Parliament is afforded under paragraphs 2 and 3 of Schedule 4 to the Scotland Act 1998. That is because issues such as private law and criminal justice are reserved in Wales, but we recognise that the Assembly needs to be able to enforce its laws by amending the law in relation to these and other reserved matters.

We have used the same definition of “ancillary” throughout the Bill. If a provision falls within that definition then the Assembly can legislate about England by virtue of the exception to the competence test in Section 108A and can modify the law on reserved matters if it complies with the restriction in Schedule 7B. The Government do not accept the argument that the test of “no greater effect on reserved matters than is necessary to give effect to the purpose of the provision” is of less consequence in Scotland. It is true that Schedule 7A in the Wales Bill contains more reserved matters than Schedule 5 to the Scotland Act 1998, but in Scotland this test nevertheless provides an important but proportionate limitation on competence. The large number of orders made under Section 104 of the Scotland Act 1998 is in part a result of the UK Government and the Scottish Government recognising how far modification to the law on reserved matters can go in Acts of the Scottish Parliament, and that modifications to the law on reserved matters that fall outside the definition can and should be made only by the UK Government and this Parliament.

Concerns have been raised that defendants will always be able to challenge the validity of Assembly Act provision as a basis for an enforcement action on the basis that this has a greater effect than necessary. We believe that, provided that the response is proportionate, this will not be the case. The frequency of such challenges and their merits will of course depend on how the Assembly chooses to legislate in future, and indeed the view of the courts if these matters were subject to challenge. Nevertheless, we consider that the legislative competence constraints set out in the Bill give the Assembly sufficient latitude to create and enforce devolved policies within the shared legal system of England and Wales.

I turn to government Amendment 78B, which is technical and is proposed in the light of issues raised in particular by the First Legislative Counsel for Wales. Sub-paragraphs (2) and (3) of paragraph 6 of the new Schedule 7A to the Government of Wales Act 2006, as inserted by Schedule 1 to the Wales Bill, sought to clarify that the Assembly is able to provide for devolved decisions or orders to be appealable to a court or to require a court order or be made by a court on application. These were included in order to provide helpful clarifications about the Assembly’s powers in respect of the courts, following the removal of the so-called necessity test and the subsequent application of the purpose test. Having examined these provisions in more detail, the First Legislative Counsel has argued that the reservation for courts, including their jurisdiction, might have the effect of restricting the ability of the Assembly to legislate for the procedural effectiveness of a new sort of order, or decision, related to a devolved matter.

The First Legislative Counsel’s analysis identifies paragraph 6(2) and, with it, paragraph 6(3) as unnecessary. Although the provision was intended to address a specific problem, I am persuaded by that very helpful analysis provided that it does not in fact require bespoke provision to address it. I accept the argument that the purpose test would encompass the sort of legislative provision that would otherwise be captured under paragraphs 6(2) and (3) and that, accordingly, they would arguably cast doubt on the breadth of the purpose test. I am satisfied by the First Legislative Counsel’s argument, and government Amendment 78B therefore proposes their removal. In light of that amendment, I think Amendment 79, proposed by the noble Baroness, Lady Morgan, becomes unnecessary, but of course that is a matter for the noble Baroness.

Amendment 78 is an opposition amendment seeking to place a new duty on the Secretary of State for Wales to establish a working group to review Schedule 1 in relation to reservations. I am most grateful for the comments and guidance on that from the noble Lord, Lord Elis-Thomas, who has very broad experience of this as Llywydd and as a Member of this House. We have had bodies a-go-go looking at the area of devolution. I served with the noble Baroness, Lady Morgan, some 20 years ago on the National Assembly advisory group, and since then there have been other bodies: the noble Lord, Lord Rowlands, sat on the Richard commission; there has been the Emyr Jones Pary review; the Holtham commission; the Silk report and the St David’s Day agreement. I agree with the noble Lord, Lord Elis-Thomas, that at the very least we have reached the end of this chapter and now is the time for us to concentrate on the things that I am sure the people of Wales, and indeed its Assembly Members, want to concentrate on—the delivery of public services and a sound economy. Some powerful arguments were put forward by the noble and learned Lord, Lord Morris of Aberavon, and the noble Lord, Lord Elystan-Morgan. I thank the noble Lord for his kind comments and hope that I would be half as charitable if someone else should appear late as he was to me. I am most grateful for his comments.

I turn to government amendments to Schedule 1, which establishes a clear boundary between the devolved matters that are the responsibility of the National Assembly for Wales and the Welsh Government and those that are the responsibility of this place and the UK Government. I can confirm, however, that I intend to bring forward amendments at Third Reading to change the status of the Open University. The noble Baroness, Lady Randerson, is not in her place at the moment, but I thank her in particular for her assistance on this issue. I acknowledge and recognise the important role that the Open University plays in Wales and therefore propose that it is dealt with in relation to devolved areas in the same way as universities and higher education institutions in Wales.

I turn to amendments to reservation M4 on developments and buildings. I will deal first with an issue raised by the noble Baroness, Lady Morgan, in Amendment 91 on the legislative competence relating to railways. I thank the noble Baroness for her comments. We propose that planning in relation to railways that start, end and remain in Wales should be devolved. I should also like to bring forward Amendment 91B giving the Assembly legislative competence in relation to the community infrastructure levy. The noble Baroness also kindly acknowledged this. Turning to Amendment 92A—I understand that the noble Lord, Lord Wigley, did not speak to Amendment 92, so I will not spend too much time on it—we are proposing that such compensation should be devolved, except in relation to the calculation of the compensation, which I think the noble Lord appreciates.

The noble Lord also indicated that he would not speak to his amendments on water and sewerage, so I will not deal with that area.

Regarding changes to the reservation in Part 1 on Crown property, I will just formally move those amendments, as I do not think they were the subject of debate.

On the issue of anti-social behaviour orders and the provisions of Part 5—which the noble Lord, Lord Thomas of Gresford, indicated he felt should be devolved—I was persuaded by the noble Baroness, Lady Morgan of Ely, in relation to this and in relation to the Dangerous Dogs Act and so on, and by the more general comment from the noble Lord, Lord Kinnock, that, where something is working, one should not to seek to overturn it unnecessarily. I think this area is working very well. We are proposing to devolve ASBOs in relation to housing. This has been acknowledged. Elsewhere—and I regret that some noble Lords will be disappointed—we shall not be going further.

The noble Baroness indicated that there has been movement on heating and cooling, so I will formally move those amendments.

The opposition amendment from the noble Baroness, Lady Finlay, seeks to remove the reservation for the sale and supply of alcohol regulated under the Licensing Act 2003. Section B17 of new Schedule 7A to the Government of Wales Act 2006 in the Bill preserves the current devolution settlement in respect of all matters in the 2003 Act covering the sale and supply of alcohol, the provision of regulated entertainment and of late night refreshment. The 2003 Act provides a framework for licensing based on the promotion of four licensing objectives: the prevention of crime and disorder; public safety; the prevention of public nuisance; and the protection of children from harm. As such, alcohol licensing is inextricably linked to policing and the criminal justice system. While they are reserved, alcohol licensing should also continue to be reserved.

The police have a crucial role in the licensing system, including in decisions to grant or refuse applications for licences, to review licences and to close problem premises. The police and criminal justice system bear a significant proportion of the costs associated with alcohol consumption—£11 billion of the £21 billion overall annual cost to society. That said, the noble Baroness is widely, and quite rightly, recognised for her campaigning on the effects of alcohol misuse. Of course, these affect people in England too—in parts of England in a very similar way to parts of Wales. I should like to place on record my enormous respect for the work she does and express the hope that she will continue to campaign on this issue. However, we feel that this is something that should be reserved to the Westminster Government.

On Amendment 90, I think there is a serious difference of opinion. We had an extensive debate on this amendment on day 3 in Committee. It seemed to establish some common ground that employment and industrial relations law must remain reserved matters. The noble Lord, Lord Hain, explained that the amendment did not intend to change the reservation of those Acts of Parliament currently listed in Schedule 1. If I may quote the noble Lord on Second Reading—and I think he has effectively restated this—he said,

“let me be clear that I am not asking for employment law as a whole—including strikes, unfair dismissal, health and safety, maternity and paternity rights and so on—to be devolved. I agree that the core issues of employment law should be a reserved matter”.—[Official Report, 10/10/16; col.1689.]

It is not my business to be putting forward opposition amendments but, as drafted, the amendment would explicitly provide for the devolution of terms and conditions and industrial relations in relation to the public sector in Wales and potentially also for contractors with the public sector. It is the Government’s firm belief that we have one system of employment law in England and Wales dealing with the public and private sectors and we do not want to have a division where we have one form of employment law and industrial relations for the public sector and another for the private sector. To say the least, this would be highly incendiary and undesirable, likely to split employees and is not something to which we could subscribe. We are firmly of the view that, just as in Scotland, this should not be devolved but retained to the Westminster Parliament.

Other government amendments were not contentious, so I will formally move those and respectfully ask noble Lords and noble Baronesses who put forward opposition amendments to withdraw them.

My Lords, I do not wish to detain the House for too long. We have spent a lot of time on this group, so I will focus on just two issues.

The first is the matter of ancillary provisions. I thank the Minister for stating on the record that the ability to enforce Welsh laws should be proportionate and not just be the minimum necessary. We need a suite of options to be able to deliver policy. However, that is not what it says on the face of the Bill, and I am sure that lack of clarity will lead in future to problems and references to the Supreme Court. I ask the Minister not to dismiss the ideas of the noble Lord, Lord Elystan-Morgan, and reassess the impact of that move to being a reserved matter in the future.

We are also disappointed that the Government have not listened on the matter of devolving industrial relations in public services to Wales. We believe that the Welsh Government currently have the power to act in this area under the conferred model and the Government have attempted to claw back this power in the move to the reserved model. This is not acceptable. We have a good track record on partnership working in Wales. We have not had a junior doctors strike and Whitehall has no idea of how health, education and many other public services are run in Wales. It is a great shame that the Minister has not moved on this issue. We shall be pushing this matter to a vote at the appropriate time. With regret, I beg leave to withdraw Amendment 75.

78: After Clause 3, insert the following new Clause—“Working group to review reserved powers and functions(1) The Secretary of State for Wales shall, within three months of the day on which this Act is passed, set up a working party to report upon the operation of each and every power and function reserved to Parliament under Schedule 1 to this Act.(2) The working party established under subsection (1) shall, within three years of its establishment, report to the Secretary of State upon the operation of each and every power and function reserved under Schedule 1 to this Act, and make such representations as are appropriate as to whether the continued operation of such reservations is appropriate in the current context of devolution.(3) The Secretary of State shall publish the report and recommendations made under subsection (2).”

78A: Schedule 1, page 52, line 30, at end insert—“2A(1) Paragraph 1 does not reserve property belonging—(a) to Her Majesty in right of the Crown,(b) to Her Majesty in right of the Duchy of Lancaster, or(c) to the Duchy of Cornwall.(2) Paragraph 1 does not reserve property belonging to any person acting on behalf of the Crown or held in trust for Her Majesty for the purposes of any person acting on behalf of the Crown.(3) Sub-paragraphs (1) and (2) do not affect the reservation by paragraph 1 of—(a) the hereditary revenues of the Crown,(b) the royal arms and standard, or(c) the compulsory acquisition of property—(i) belonging to Her Majesty in right of Crown;(ii) belonging to Her Majesty in right of the Duchy of Lancaster;(iii) belonging to the Duchy of Cornwall;(iv) held or used by a Minister of the Crown or government department.2B_(1) Paragraph 1 does not reserve property held by Her Majesty in Her private capacity.(2) Sub-paragraph (1) does not affect the reservation by paragraph 1 of the subject-matter of the Crown Private Estates Acts 1800 to 1873.”

My Lords, I have already spoken to this amendment and do not intend to say anything further except to state, in reply to the Minister, that an important principle of subsidiarity is involved here. Comments have been made from the very moment this Bill came before the House that the reservations in Schedule 1 are a ragbag of items collected from various government departments. I have commented on this issue of anti-social behaviour, which should really be dealt with at a local level. Accordingly, I seek the opinion of the House.

83: Schedule 1, page 61, line 3, at end insert—“ExceptionIn the case of a betting premises licence under the Gambling Act 2005, other than one in respect of a track, the number of gaming machines authorised for which the maximum charge for use is more than £10 (or whether such machines are authorised).”

85A: Schedule 1, page 67, line 11, after “licensing” insert “and the regulation of works that may obstruct or endanger navigation,”

85B: Schedule 1, page 67, line 24, at end insert—“Marine licensing and the regulation of works that may obstruct or endanger navigation, so far as relating to searching or boring for or getting petroleum under such a licence.”

85C: Schedule 1, page 68, leave out lines 10 to 13

85D: Schedule 1, page 68, line 13, at end insert—“ExceptionsHeat and cooling networks, but not the regulation of them.Schemes providing incentives to generate or produce, or to facilitate the generation or production of, heat or cooling from sources of energy other than fossil fuel or nuclear fuel.”

87A: Schedule 1, page 70, line 34, at end insert—“The reference to maritime search and rescue does not reserve participation by Welsh fire and rescue authorities in maritime search and rescue responses.”

89A: Schedule 1, page 72, line 25, at end insert—“The deferral of payment due to a local authority from an individual in respect of costs of, or financial assistance for, meeting that or another individual’s needs for care or support.”

90: Schedule 1, page 76, line 3, at end insert—“Terms and conditions of employment and industrial relations in Welsh public authorities and services contracted out or otherwise procured by such authorities.”

My Lords, there being an equality of votes, in accordance with Standing Order 56, which provides that no proposal to amend a Bill in the form in which it is before the House shall be agreed to unless there is a majority in favour of such amendment, I declare the amendment disagreed to.

90C: Schedule 1, page 82, leave out lines 3 to 13 and insert—“M1 Registration of land180_ Registration of—(a) estates, interests and charges in or over land, and(b) associated actions, proceedings, writs and orders.ExceptionFees for the registration of local land charges.”

92A: Schedule 1, page 82, leave out line 29 and insert—“185_ Compensation in respect of—(a) the interference with rights in land by exercise of a statutory power;(b) depreciation in the value of land as a result of works or land provided or used in the exercise of a statutory power.”

93A: Schedule 1, page 82, line 34, at end insert—“but only in relation to specified Crown land and specified undertaker land.”

93B: Schedule 1, page 83, line 12, at end insert—““Specified Crown land” means land—(a) belonging to Her Majesty in right of the Crown;(b) belonging to Her Majesty in right of the Duchy of Lancaster;(c) belonging to the Duchy of Cornwall;(d) held or used by a Minister of the Crown or a government department.“Specified undertaker land” means land held or used by a statutory undertaker in the exercise of a statutory power that relates to a matter in paragraph 94, 95(f) and (g), 97, 115, 119 or 123.”